AML Talk Show Hosted by Stephen Platt
Good morning and welcome to this KYC360 Anti Money Laundering Talk Show with me Stephen Platt. Today I'm super excited to be discussing the illegal wildlife trade. This may surprise you as it did surprise me. But according to the UNODC analysis, the international wildlife trade is worth somewhere in the region of between $17 and $23 billion dollars a year, which makes it the fourth largest crime on a global scale. The Financial Action Task Force and United for Wildlife Foundation have highlighted the conversion of the international wildlife trade with narcotics, human trafficking, the arms trade, counter proliferation, and financial threat.Therefore, it's very, very important to look at the international wildlife trade as a poly threat. It's also interestingly perceived by many organized crime syndicates around the world as a low risk crime model, which is very profitable. To discuss this really, really important issue, I'm delighted to be joined by two expert guests Chinali Patel, and Brian Gonzales, who both joined me from Asia. ....
Good morning and welcome to this KYC360 Anti Money Laundering Talk Show with me Stephen Platt. Today I’m super excited to be discussing the illegal wildlife trade. This may surprise you as it did surprise me. But according to the UNODC analysis, the international wildlife trade is worth somewhere in the region of between $17 and $23 billion dollars a year, which makes it the fourth largest crime on a global scale. The Financial Action Task Force and United for Wildlife Foundation have highlighted the conversion of the international wildlife trade with narcotics, human trafficking, the arms trade, counter proliferation, and financial threat.
Therefore, it’s very, very important to look at the international wildlife trade as a poly threat. It’s also interestingly perceived by many organized crime syndicates around the world as a low risk crime model, which is very profitable. To discuss this really, really important issue, I’m delighted to be joined by two expert guests Chinali Patel, and Brian Gonzales, who both joined me from Asia.
Chinali commenced her role as console international illicit finance at the British Consulate General in Hong Kong in April 2019. Her role has a specific focus on policy and strategy, enhancing diplomatic engagement, capability and capacity building in close coordination with UK regional and international partners to tackle illicit finance linked to a range of predicate crime types, including, of course, IWT. Chinali has 13 years of UK law enforcement experience in tackling serious and organized crime, and prior to her role in Hong Kong, she was chief of staff to UK National Crime Agency, director of vulnerabilities.
Brian, is head of protection of endangered species for the World Wildlife Fund in Hong Kong. He has over 18 years of experience in project and development, technical assistance management, conservation, and enforcement policy, as well as program monitoring and evaluation. He has been based in Bangkok for 13 years, where he assumed leadership roles in multiple USAID funded projects and has worked across southeast Asia, raising institutional awareness and shaping policy responses to counter wildlife trafficking. So Chinali and Brian, I hope you can both hear me clearly. Thank you very, very much for joining me this morning. I know that our listeners, both on the live broadcast, but also the many hundreds and thousands that will download the podcast subsequently are going to be very interested in hearing what you have to say about IWT.
If I can, I’d like to ask this question, to kick this discussion off. A lot of our listeners, well actually I know, I suspect know very little about the international trading wildlife. I suspect they probably won’t associate it with money laundering in quite the same way as other forms of predicate crime such as drug trafficking. So could I start by asking you really to educate me and our listeners on the trade in wildlife really from the ground level up. How does this trade actually occur? What does it look like? Could we start with that, please?
Yeah, thank you, Stephen. Good morning, good afternoon, everyone. My name is Chinali Patel. Thank you so much firstly for making time. I know it’s a challenging time for everyone with COVID and working from home or getting into office. So firstly, grateful to listening, and just as Stephen said, I just would like to make an honest confession even for me coming from law enforcement background. Illegal wildlife trade knowledge was quite minimal. I didn’t realize that it was such an emerging global threat.
So as Stephen said, one of the most prominent aspects of illegal wildlife trade is that it’s a low risk, high profit model. So often overlooked by law enforcement agencies, often overlooked when you are kind of working at ports and borders. In terms of the high risk jurisdictions where the trade kind of emanates, you’re looking at Africa as a source region, for example. So you will see illegal wildlife trade in Africa, converging with firearms trafficking, human trafficking, drugs trafficking, but also from a money perspective, quite strongly linked to corruption, which is one of the key biggest areas that we’ll kind of talk about later. But that is kind of the source region, so to speak.
Then you’ve got the transit and the destination, and Brian will go into a bit more detail around the trade and the offenses that are kind of linked into illegal wildlife trade. The biggest thing around illegal wildlife trade is also like any other threat, it evolves. It’s basically criminal networks thinking sophisticated. So for example, in COVID times, they have displayed some of that threat online. So you will see, again, a lot of the internet companies having to deal with the volume of illegal wildlife trade, whether that’s selling or retailing online, which I’ll go into a bit more detail later, for you as well.
One of the key things where kind of, I guess the money is concerned is, one of the biggest gaps for embryonic threats globally, like IWT is following the money. So what you do see is a lot of seizures happening. So a lot of them happen in Hong Kong, for example, where I’m based, but what you don’t have is resources dedicated to do financial investigations, working with international partners to follow the money, and this was the foundation of the FATF report. Basically, the FATF report that was published with UK, China, Botswana partnership, highlighted the need for public private partnership. Which I’m sure resonates with the audience because, like with any other threat, a whole system’s response is absolutely imperative. I’ll pause there and I’ll probably hand over to Brian.
Thanks, Stephen for this opportunity and thank you for inviting us, and thank you Chinali for that excellent outline. I just want to say that why do people want wildlife and what is wildlife? Some of you might be asking, you’ll hear terminology such as fauna or flora in this discussion. Fauna means animals and birds, such as tigers, falcons, but also fish. Flora are plants such as orchids or cacti but also include timber and non timber forest products, some of which are illegally traded at very significant levels.
Now why do people want wildlife? People use wildlife in a variety of ways. We will discuss of course, CITES the UN Convention on International Trade of Endangered Species and how it relates to the protection of animals, and how unsustainable or illegal trade have pushed some of the species into protection by CITES and by national governments. People use wildlife as for a collectible, trophy, for exotic pets, medicine and food.
Now, I also want to stress that not all wildlife trade is illegal, actually, globally legal wildlife trade is a $300 billion industry. Stephen mentioned earlier the black market value for the illegal wildlife trade. Wild plants and animals from thousands of species are caught or harvested from the wild and then sold legitimately as food, pets, ornamental plants, or medicine. Wildlife trade escalate into a crisis when an increasing portion is illegal and unsustainable, and as Chinali mentioned earlier, the source countries such as Africa, the transit countries like Hong Kong, Thailand or Singapore and the destination countries like Vietnam, or China, and there’s a whole value chain involved. Now the complexity is that I mentioned legal trade and there’s illegal trade. It’s also the commingling of the illegal and wildlife trade. It’s very difficult to understand also and to detect but we can have discussions of specific cases.
Okay, well, look at that really interesting introduction, as it were to the topic, let’s just go back and explore some of those points in more detail. Clearly, in order to combat this, as Chinali said, it’s critical that we’re able to follow the money and identify where funds might relate to this illegal trading in wildlife. But like a lot of other predicate crimes if we take drugs as an example, it’s a trade that originates in a particular part of the world. The product is transited through particular places, ports, I presume, and is destined for a different and particular part of the world.
So when we talk about drugs, we know that we’re talking principally about South America, or certain parts of the Middle East, destined for the markets, principally of Europe and North America. Now, for us to understand as listeners the trade in IWT, am I right in saying that this trade originates in large part, I presume, in Africa, and with a product that’s destined, principally for a market in Asia. Am I right in saying that China is the world’s largest consumer of the trade in international wildlife? Help us to understand just how this form of predicate conduct, this trade actually takes place.
Thanks, Stephen. That’s a really good question to kind of bring to light, I guess the detail of how the trafficking, the trade, the money flows is kind of undertaken. So first I need to say I’m amazed at the amount of good work, proactive work done by wider civil society partners in the space. So example is WWF, you’ve got Brian today RUSI. RUSI, have done fantastic work in the African region, particularly around working with local governments, working with local partners to enhance that knowledge of illegal wildlife trafficking.
So for example, typologies, building typologies, and understanding of where the vulnerabilities in the system are. You’ve got, United for Wildlife Foundation doing similar work. So going into a bit more of that detail. So when you look at illegal wildlife trade and money flows, criminal networks utilize basically funds that tend to be layered across different financial sectors through cash deposits. So you will often see this disguised as loans or payments. They will also do kind of basically involve commingling between as Brian highlighted, enlisted and listed proceeds.
So what I mean by that is, criminals tend to incorporate front companies or shell companies in source in destination countries, and utilizing complex structures again, in that regard. So this might sound familiar to the traditional illicit finance experts that might be on online. Criminals also tend to use front companies that have connections with import, export industry to help justify the movement of goods and payments across borders.
Another kind of really tangible example is purchase of real estate. So like for drugs trafficking, you invest the money somewhere else, it’s similar in illegal wildlife trade. So one example I can give is an Indonesia where an illicit actor was transporting over 300 kilograms of armadillos, but laundering the proceeds to purchase of assets, mainly cars, and properties. So this is where my broader point comes in. That when you think of IWT you think similarly to other series in organized crime threats, you’ve got to have a whole system response. You’ve got to engage estate agents, lawyers, financial institutions.
The other element, as I’ve said to you previously, that’s kicked in is the use of technologies. So to give you a practical example of that in COVID times, there was increased selling and trading of IWT products online, wholesale and retail. What we really saw is commodities like shark fins, ivory trade, ivory, tiger bone, pangolins, all been sold online on e-commerce platforms, WeChat, Carousell. The payment methods, as you would expect with similar kind of threats, were done round kind of cards, cash, again, utilizing WeChat, which is quite prominent in Asian subcontinent, and the pricing method would be zero to 50%, lower pricing than physical markets.
So this all just kind of to give you a broad idea about the kind of things that they utilize. Brian can touch on some of the broader case studies, which I think will really bring to light the organized crime aspect of illegal wildlife trade.
Okay, that sounds great. Sorry Brian, it sounds just from what Chinali was describing there, this really is a very, very sophisticated form of criminality. Brian, tell us is it genuinely organized crime groups that are controlling this trade and are they similarly involved in other forms of serious predicate conduct? Because I can imagine that if you are an organized crime group involved, for example, in the drug trafficking trade, there are really economies of scale in involving yourself also in IWT. You’ve got the laundering routes, you’ve got the transit routes, you’ve got the transportation connections and so on. So do you see those sorts of organized crime groups leveraging off their dominance as it were in other forms of crime to dabble in IWT?
Thanks, Stephen. And, again, excellent background from Chinali. I just want to also stress that wildlife crime or wildlife trafficking doesn’t… the seizure in a certain country or a destination country, it’s not the crime itself. It started in the source country. There are local poachers involved, professional hunters, national or international, there are transporters, local fixers, and then how to move it around one to two, three countries, just to transport it to point B. It’s a very complicated process.
Now, I just want to talk about a case that’s very interesting and this touches, this highlights the poly crime element of wildlife trafficking. In 2011, a Thai national was arrested in South Africa for arranging the illegal poaching and importing of rhino horns from South Africa to Thailand. Now, this was done through obtaining false licenses for hunts in order to kill 24 rhinos in a period of two years.
Now, to justify poaching incidents as hunts by foreign nationals, which is legal in South African law, the suspect hired Thai prostitutes in South Africa, who post next to illegally killed elephants to justify the hunt. Now, the smugglers working for the suspect bribed police officers and customs in Thailand to smuggle in the rhino horns, customs officials, thanks to joint investigations of AMLO, the Anti Money Laundering Office of Thailand and South Africa Revenue Services, they were able to see the vehicles, froze bank accounts and seized properties. The suspect involved is now serving 40 year jail in South Africa. So you see the poly crime element and this syndicate that I mentioned has businesses in other countries, not just Thailand and South Africa, but it’s a well known case that we have documented.
I see, that’s genuinely very interesting. Now a lot of people might say and this is a difficult question, but I’m going to put it to you anyway. A lot of people might say, “Well, look, of course I don’t agree with the illegal wildlife trade but it isn’t as toxic, or as damaging to society as, say, human trafficking or drug trafficking.” Both of which kill people. As a consequence, some people might say, “Look, it’s important, but I can’t get quite as worked up about this as I can about those other crimes.” I think personally that’s mistaken response, but what I’d like you both to do really is describe in your own words, why you think that the IWT trade is as problematic as let’s say the drug trafficking industry for anti money laundering professionals.
Yeah, again, Stephen, a really, really pertinent question, and quite timely, actually. So, personally speaking, my own personal view. So illegal wildlife trade, I believe has significant cost impacts on our environment, our biodiversity, our public health, not least because we know the zoonotic diseases, prevalence is kind of really highlighted the impact it has on economies globally now. This is an aspect where because of the poly threats, the more you ignore it, the more criminal networks for profit. I also feel there is an element of addressing this kind of now, because the public private partnership aspect is kind of critical to this.
So for example, in China being kind of the biggest consumer links to corruption, links to corruption in African countries. When it comes to kind of financial institutions we’ve seen that money flows to a majority of the global financial centres. From a personal perspective, like any other global threats, serious and organized crime threat, this is really the time to pay attention to it. But I also accept, I’ve got to say, in my humble opinion, the challenge is there also because you are balancing this, no matter what industry or law enforcement agency you’re in with other serious and organized crime threats. But this is where data sharing information sharing, international cooperation really comes together, in fairness.
I know Brian will have kind of broader thoughts on the impact on biodiversity and sustainability. But if I can give some practical key takeaways for financial institution, colleagues who may be kind of be online, review your transaction monitoring, screening and KYC policies and procedures, that’s really, really important when kind of detecting illegal wildlife trade flows. If you have any business accounts for companies that are operating in the wildlife or environmental sector, please look at that enhanced due diligence as you would for other crime threat types, and monitoring your customer kind of regimes. I think that customer due diligence is absolutely imperative, and that detecting that suspicious activity and transaction monitoring as FATF has kind of pointed out. But I know Brian would have more to say, but my final thought in this is, I think RUSI brought out this paper on corruption just recently, it’s been published.
So to give you kind of an example, I think, corruption, which is a priority for all of us and financial institutions, as RUSI has said, it’s a really good starting point. This is not about reinventing the wheel, in my opinion, this is about utilizing your existing resources capabilities as you would for any financial investigation or any financial transaction monitoring, and utilizing that in kind of looking at the corruption enablers as a starting point, and I’ll pause there.
Excellent question also, and well, I just want to stress that there’s a good governance angle here and the corruption was touched by Chinali. So I won’t discuss it any further. But I just want to say that there’s a lot of money involved in IWT, in wildlife trafficking. Just here in Hong Kong, from data from our colleagues from ADM Capital Foundation, they’ve been collecting this with other partners here in Hong Kong. The market value of seized wildlife is over 570 million Hong Kong dollars in the last five years. That’s around 75 million US dollars of black market value, and that involves 60 countries from source to transit to destination.
Just to give a statistic on the prosecution, in 2019, Hong Kong arrested 497 people for wildlife offenses. 199 of those were prosecuted, and nearly all were expendable carriers or mules. What’s puzzling is that there are no money laundering investigations involved, or offenses involved in all these investigations. The amount of money involved the amount, we know it’s organized but no one is using the money laundering statutes to prosecute and to investigate further and look into who are the kingpins behind the trade.
I just also want to say that because of COVID-19, we know we’re in this pandemic because of and there are links to wildlife consumption. I think we have to be very vigilant also that emerging zoonotic diseases, zoonosis of wildlife origin represent one of the most significant threats to health of world population. So I think we need to understand also that unsustainable wildlife consumption and trade can be a danger. The World Bank estimates that the economic burden of just six zoonotic diseases amounted to 80 billion over 12 years. The 2003 SARS outbreak affected around 99,000 people and cost the global economy in the range of 30 to 50 billion. Also we don’t know yet the full impact of COVID-19. So those are my takeaways.
That’s I think two really, really good answers. I mean, look, we all know, don’t we, that this is about hearts and minds. The point that you made there Brian about the global pandemic, and it’s sort of tangential link with illegal trading in wildlife should serve to motivate everybody to have a high degree of sympathy with this fight against the trade in illegal wildlife. Let me ask this question, I can understand the supply side, there’s a lot of money to be made out from dealing in these illicit goods. I suspect that actually, the sums of money involved are likely to go up over time as the supply of certain forms of illegal wildlife becomes even scarcer. We can perhaps come back and talk about that momentarily.
So I can understand the supply side, I can understand the demand side, there’s strong demand for these products in certain parts of the world, in many ways, it’s cultural, and then I can understand the money side. We’ve got to get people within the financial services industry, aware of this, engaged with it, we’ve got to make them understand that it is closely associated as Chinali said, with a range of other very serious crime types, whether it’s drugs, whether it’s corruption, fraud, and so on and so forth, as the FATF also outlined.
But what I’d like to focus on for the moment is the demand side, because the financial services industry can play its part, it can embrace IWT and seek to identify money flows that relate to it, report those suspicions to the authorities and so on. But what is happening to reduce the demand? What if any steps are being taken in those countries that are the biggest consumers of this product to dampen down the demand?
Thanks, Stephen. And again, I think personally speaking, a really, really valid question given where I am located. So China, as Stephen said, is the biggest consumer of IWT, but China has also to have a kind of a balanced view here has also taken proactive steps to address that not least legislative. So the latest one was pangolins been banned, either from kind of trafficking but also kind of being sold, I guess, as well. I think that was a step change. This wouldn’t be expected even two years ago, so for China for that to happen, that was a big step change.
The other element was around kind of Chinese herbal medicine. That’s still a very sensitive area, particularly in the subcontinent here. But it’s slowly, we’re seeing changes probably not as much as we’re expecting, but talking about whole system response, China has basically also ensured around prevention space, that they are supporting farmers who breed endangered species. Compensation for farmers, working with local authorities to ensuring there’s employment, alternative employment opportunities for them, which is exactly been kind of replicated in Africa. So the work of that traffic, RUSI and others are doing in the region truly, truly reflects that.
The final kind of element that I wanted to touch on which I came across, actually today, and I thought, this is fantastic, because in COVID times, as I’ve said, the displacement has moved to e-commerce platforms, particularly in Asia. So the internet companies have proactively done the following. So the biggest internet search giant is Baidu if audience has I’m sure heard of that. So what they have done is they’ve adopted a big data machine learning basically, to eliminate illegal online information.
Just to give you an example of a particular data set, it deleted roughly 263,000 pieces of information, and automatically blocked over 1.4 million advertisements for illegal wildlife products in a very short space of time. That’s a lot. To kind of touch on to that as a supplementary Taobao, which is Alibaba platform, for instance, launched an automatic pop up that educates users searching for prohibited species on the impacts of trafficking.
So this is internet companies really coming forward and playing a substantial role. But that’s not enough in all honesty, money flows still remains a gap. So we are working with our Chinese counterparts, we are working with People’s Bank of China to address this. So there is a long way to go but at least I think that demand reduction for now is slowly been addressed at least in the kind of the mainland China aspect.
I see, and are we seeing similar steps being taken in other Asian countries? Brian talked about Vietnam, for example earlier, Thailand, Indonesia. Is there a sort of a regional response to try and address the demand or are we only seeing that in China currently?
Thanks, Stephen. And again, excellent response from Chinali, very comprehensive. Within Southeast Asia, they’ve been very active also. I mean, in the policy space, in the law enforcement. Actually last year the government of Thailand convened an ASEAN, Association of Southeast Asian Nations ministerial meeting to discuss counter wildlife trafficking. In that meeting, they issued a ministerial declaration on IWT which covers demand reduction and also, I think for the first time, a focus on financial crime and online cyber trafficking. Focus on cyber crime efforts within ASEAN.
Chinali, did mention also the legislation being revised and enhanced in this region. Many southeast Asian countries are revising their legislations, increasing penalties, fines for wildlife trafficking offenses. There’s a lot of offenses actually related to wildlife trafficking that needs to be increased. There’s illegal processing, trafficking, import and export, legal acquisition and captive breeding.
So there’s a lot of efforts on the ground, and there’s the Association of Southeast Asian Nations working closely. They’re working with the US, with the UK government, with China. The UN also has the international consortium to combat wildlife trafficking. So they have underground activities. But hopefully the financial crime component or aspect of investigation gets involved in the operations.
Right now they’ve been doing a lot of operations, but the FIUs are not really involved. But in 2020, this year, there’s going to be, it has not happened yet. It’s not public anyway. There’s these agencies, ASEAN, US, Interpol, et cetera, they will be conducting a global operation on illegal wildlife trade, and for the first time, they will be involving the FIUs. Meaning the Egmont Group. So this is very promising and hopefully within the year or before the year ends we can hear some promising outputs or operations or investigations from that global IWT operations.
It’s interesting, I get the sense that this really is sort of shooting up the agenda in terms of prominence for anti financial crime agencies. Clearly it’s important that industry recognizes that. Are you able to also talk to us about what’s happening in those countries where supply is originating? Are we seeing steps being taken, for example, in some African countries to really crack down on this trade? Is there any progress being made there?
I think Brian will be having a lot more detail on that. But I know from engaging with United for Wildlife Foundation and other wider civil society partners, one of the saddest aspects of COVID has been displacement of IWT to increase poaching. So you don’t have the tourism, you don’t have the income for communities in certain really kind of poor regions in Africa. So that’s really increased the poaching of elephants and other endangered species which is quite unfortunate and it’s really, really sad. But this is the flip side, I truly believe of organized crime, where we often see the crime being displaced elsewhere. This is where I feel maybe I’m being not as optimistic. I totally feel can we ever address the demand reduction in totality? But I think Brian can hopefully cover your broader question around Africa, Stephen.
Yeah, thanks, Chinali and Stephen. Well, in Africa, I’ve been seeing a lot of law enforcement actions on the ground. There are a couple special agents, for example, from the US government Fish and Wildlife special agents posted in Africa. That’s really to show their interest to understand the source country and the poaching situation and the syndicates involved in those countries. I’m also starting to see a lot of efforts being invested by United for Wildlife, the financial taskforce events and activities, and national events happening in that region. United for wildlife, ACAMS, Association of Certified Anti Money Laundering Specialists will soon organize an event specifically on IWT for southern Africa.
So there is momentum especially in the financial crime aspect, it’s slow but it’s you got to start somewhere and I’m happy to say that the these institutions are starting to be in involved. RUSI, as Chinali mentioned a while ago, they’ve started to incorporate AML and financial crime investigations and establish rapid reference guides. We call it RRGs, but this all started in Africa, in many of the countries in Africa. It’s sort of a handbook to investigate wildlife crime.
In the past, there was not so much financial crime was not very prominent, but because of the work of [inaudible] the investment of the UK government and special agents from US Fish and Wildlife, UNODC it’s now there, the financial crime investigation element.
That’s interesting. I asked this question about the supply and demand side because sometimes the financial services industry I think can feel a little bit put upon. If you think about other major crime types if we take drugs, the international response on trying to address supply has largely failed. The international response on trying to dampen down demand has failed. Yet the financial services industry finds itself in some ways in the middle, obliged to spend hundreds of billions every year in identifying illicit financial flows that are related to that industry. I often speak to people within the sector who say, well, we’re doing our bit but the problem just continues to grow and grow. But it seems from the responses that you’ve given that there really are efforts that are beginning to bear fruit, both on addressing the demand and the supply side of IWT.
So let me ask you this question. Do you feel from what you’re seeing that you are, as it were engendering the sympathy of the financial services industry? Do you think awareness levels are rising? Are you seeing or are FIUs beginning to see a good level and quality of intelligence about IWT being reported by financial services institutions?
Thanks, Stephen. So I’m of the belief and this is, again, my personal view that we need to support financial institutions. We need to support banks, in terms of having that kind of enhanced intelligence picture. We cannot just say this is their problem alone. So I think it’s that partnership, collaboration is absolutely critical. So to that end, I think what we have done in partnership with WWF, ACAMS, shipping sector, financial institutions, like Standard Chartered, and also bringing in wider civil society partners like British Council, to the table as well, we’ve created the very first call system response in Hong Kong.
So what we call actually a four P model. Some of my colleagues or listeners would be familiar with UK law enforcement utilizing this, which is pursue, prevent, protect, and prepare. That’s exactly what we’ve done in Hong Kong. So it’s not one organization’s problem alone, we are doing greater initiatives together. So for example, coming together as a task force, sharing that information sharing that learning typologies. How do you kind of raise SDRs? So one of the biggest and I guess recent examples, is the IWT certificate launched by ACAMS and WWF. It’s the first kind of you’ve got your two hour web based program, no matter what your knowledge base is, if you’re a compliance officer, if you’re not familiar with IWT, you’ve got your red flags, you’ve got your risk indicators. How do you raise an SDR, for example.
So it’s a supporting mechanism to ensure that you are equipped to do that, basically, you feel supported to do that. We’re working with shipping sector in Hong Kong, in a way and that’s again, a step change, that hasn’t happened. Soon WWF traffic and United for Wildlife Foundation, Stephen will come out with a compendium toolkit for shipping sector, which will be brilliant because everything is in a supply chain. Right from start to finish you need every partner to contribute, and we are updating which I’m really pleased to see, hopefully over the next couple of months, for the first time in Hong Kong, we would be including IWT in the school curriculum.
So you’re preparing future generations and educating them about the impact of IWT. So for me, I think in my humble opinion, you’ve got to support each and every partner, because I don’t think this is one organization’s problem other than the other. I would say it’s not a financial institution issue, it’s a whole system response issue.
That’s a really, really interesting answer, and I’ve got a lot of sympathy with the whole system response. Everybody, every stakeholder in this has clearly got to play its role if we are going to really crack down on this trade. I suppose, I’ve drawn analogies between this and the trade in drugs so far during our discussion, but it’s different in one really important and vital respect, isn’t it? In the sense that the supply of narcotics is infinite whereas there are only so many rhinos left in the world. I watched a program the other night on the BBC really hosted by Prince William, the Duke of Cambridge, talking about this issue and how strongly he feels about it.
I hadn’t appreciated before I watched that program, just how few rhinos there are left in the world, which it’s a complete tragedy. This gives this issue a particular urgency, doesn’t it? But here’s the thing. What makes you think that this battle, this war on the international wildlife trade can be waged more effectively than for example, the war on drugs which we failed on? Can we really turn this tide against the trade in illegal wildlife before it’s too late?
I don’t know. Well, I think in my kind of, again, my simplistic view on this, I feel like this is a serious and organized crime problem. I think we often tend to kind of, I guess, silo threats. This is drug trafficking. This is human trafficking. This is child sexual exploitation and abuse. This is firearms, and this is IWT. I genuinely feel again, this is my personal opinion, criminal networks don’t think like that. Criminal network will think I want to engage with that criminal group or individual elicit actor, I don’t care where they are from, whether it’s dark web, whether it’s face to face, I’m going to do that.
We need to have a similar mindset when we are approaching serious and organized crime or it’s IWT. It’s not segregated, I think we need to look at through the lens of corruption, we need to look at it through the lens of money laundering, because IWT equally has that at the heart of it in fairness. This is why I guess all this institutions like RUSI, like WWF, like ACAMS, the subject matter experts are really bringing this to the fore, that stop looking at it with a lens of this is just IWT, look at it with a lens that you’re treating this in equal par with any serious and organized crime threat with the same resources, same capabilities that you have, rather than reinventing the wheel.
I guess, I understand the answer to the question, Chinali, it’s a good answer. But I don’t actually think it necessarily answers the question that I’m putting. In the sense that if we view IWT through the same optic as all of those other crimes, because as you say, it’s artificial to distinguish them because they’re controlled, essentially by the same organized crime groups. Isn’t that part of the problem? Because our response to the way in which we viewed those other crimes and tackled those other crimes hasn’t actually been very successful. In other words, is this an opportunity, is IWT an opportunity for us to respond differently and more effectively, as an industry than we have done in the past?
Yeah, and it’s a very, very good point, Stephen. Yes, it is in some ways, but I also need to be mindful of limitations. I like to think that pragmatism needs to be kind of coming into effect at times. Law enforcement has challenges when they see IWT vis-a-vis modern slavery, human trafficking, resources automatically get dedicated to modern slavery human trafficking. Financial institutions have resources dedicated doing deep dives of transaction monitoring on traditional illicit finance threats. It’s a difficult balance.
But I also feel that you need to have a starting point, maybe not kind of the answer, I guess, Stephen you’re looking for, but IWT in many ways, in fairness, does give you that effective starting point. The time is now actually, governments across the world, some really strong global leaders, like UK is focusing this not least through COP 26 next year, it has strong links to climate change and biodiversity as you helpfully outline. So this is actually a threat that can lead to kind of dismantling other criminal networks with other poly threats. But again, this is a very simplistic view, and it takes a lot more than that I completely appreciate that.
When you say the time is now, Chinali and obviously, the time if not now then when, right? Because we’ve already explored clearly the link between IWT and the global pandemic from which we’re all reeling, but on the positive side, the pandemic has also illustrated that we can mobilize, right? That we can organize and we can respond. Okay, let’s face it, there are some parts of the world that are doing that more effectively than others, but nevertheless, there has been a response which has been fairly uniform. So we should take from those two points. The fact that the time really is now to address IWT and financial services clearly needs to get on board, to the extent that it’s not on board already, in raising its own level of awareness about this as a predicate crime type and playing its full part in addressing it. Brian, you wanted to add something.
Yeah, I just want to add to the discussion on pandemics and the role of IWT and zoonotic diseases and what we’re into right now. There’s a new approach being adopted now, globally, and it’s called One Health Approach. It’s where the ministries of health, the ministries of agriculture and those who handle animal check and animal health, and there’s an integration with the Ministry of Environment, we’re in environment, wildlife enforcement, security, then they should be working together.
This is movement now within FAO, WHO, the World Organization for Animal Health to consolidate all this efforts. So there’s a recognition now that IWT has to be included in human health planning, in animal health planning. So it’s starting, it’s slow, but hopefully in Asia we’ll catch up but there is this effort happening now.
Okay, thank you, Brian. Well, Chinali, you talked about the emergence of training programs focused on IWT, specifically for financial services professionals, are you able to help us to understand as an industry what the signs or red flags might be? I’d like our listeners to go away with some really practical takeaways from this discussion. I think we’ve done a good job of generally raising awareness of IWT, and why there is clearly an imperative in addressing this.
But I understand Of course, in asking the question, it can be enormously difficult for financial services professionals to try and identify particular forms of predicate conduct that suspicious money flows or transactions might be related to, but nevertheless, are there any red flags? Are there any indicators of IWT that our listeners should be aware of?
Yeah, thank you, Stephen and I completely agree, it’s not the easiest and this is why the FATF report is encouraging more financial investigations to be undertaken for IWT to be part of national risk assessments for high risk jurisdictions globally. So to that end, I think earlier on I covered what I guess positive action that can be taken by financial institutions. So looking for red flags, and Brian can expand on the ones that I miss out or haven’t covered. Wired transfers.
So for example, any increases that you see in cross border transactions from jurisdictions that are at a higher risk of IWT. So high risk jurisdictions are source countries in Africa, you’ve got obviously Asia Pacific countries like Cambodia, Vietnam, Indonesia, you’ve got kind of China is the biggest consumer, but you also got global financial centres like Singapore and Hong Kong, where obviously the transactions flows through. So something to keep in mind around the irregular credits and wired transfers.
The second point is around irregular large or round amounts inconsistent with profile of individual to the business as you would expect for your other serious and organized crime threats. Cash intensive activity. So what I mean by that is transaction types should match the profile and the activity of the client. Using words to exclude false positives. So, examples school or academic with emphasis actually given to results with high risk words like game, farm, logistics are the few that immediately springs to mind. Brian, please let me know if I missed out and if you can expand on others.
Thanks Chinali. Actually, there’s a lot and to understand the red flags in IWT, you also need to understand the high risk industries. I mentioned earlier that there is legal trade, so the commingling of illegal and wildlife and endangered protected species can happen with the legal trade. So, in the source transit and destination countries we have to identify high risk industries. We have a list, I will name a few. I mean, I cannot elaborate too much but there are game lodges, safaris, cash intensive businesses. Companies that sell low value high bulk agricultural products, key exports, seafood companies or exporters, restaurants.
In transit countries you can look at general trading companies in free trade zones. I know it’s difficult there’s a lot of them. Destination countries medicine production companies, pet stores, leather goods companies. We have a list of this high risk industries and transactions in our ACAMS force. You can also find a couple of red flags in page 60 of the FATF report on illegal wildlife trade. So it’s a good resource you’ll find these red flags and key risk indicators in that report. There are also bespoke trainings by Interpol by UNODC where you can find red flags and give us indicators related to wildlife trafficking and industries involved in wildlife trafficking.
Okay, Brian, Chinali that’s I think two really good answers and I agree that the FATF report on IWT is a really good source of information on red flags, and perhaps an excellent starting point for our listeners in advancing beyond what they’ve heard today, their understanding of this threat. It’s a fascinating subject, I personally have learned a great deal in preparing for today’s discussion and indeed, in engaging in the discussion with you. I could easily talk to you both for much longer, but we’re up to our time limit, I’m afraid and I want to thank you, Chinali and Brian, on behalf of all of our listeners and KYC 360 members for taking the time to share your expertise with us.
I hope that you as listeners have enjoyed today’s discussion. If you like what you’ve heard today, do please spread the message about today’s interview, and also about KYC 360 in the AML Talk Show more generally. This recording will be available as a podcast on KYC 360 as well as many other platforms from tomorrow. But for now, please stay safe, and thank you once again for the privilege of your time. Goodbye.