"Following-the-money" in environmental crime cases: Lessons from experience

By Amanda Cabrejo le Roux, Environmental Crime Specialist, Green Corruption Programme and Isabella Romero, Co-Coordinator, Countering Environmental Corruption Practitioners Forum | Basel Institute on Governance

This post reflects on learning from cases and experiences shared in the first six months of Follow-the-Money (FTM) Working Group meetings led by the Basel Institute on Governance under the Countering Environmental Corruption Practitioners Forum.

The Working Group gathers virtually on a monthly basis. These monthly meetings are a space for practitioners who work in conservation, anti-corruption and financial investigations to exchange experiences on “following the money” to address environmental crimes. Stay tuned for future updates.

Rock lobster fishing in South Africa

The case presented during the meeting was the widely known Bengis case, related to the illegal trade in rock lobster from South Africa to the US over more than 15 years. It involved a major jail sentence and the unprecedented recovery of criminal assets.

The South African fishing company, Hout Bay Fishing Industries, overfished lobster and other protected fish, deliberately breaching government-established quotas. The extent of unlawful overfishing was such that environmental experts had claimed that lobster numbers in South Africa were in freefall and that the terminal decline was only halted when a criminal investigation commenced (more details can be found in the court judgement).

There were significant forensic difficulties in tracing profits that were placed in complex offshore trust and company structures. Also, the mutual legal assistance required for this case operated differently 20 years ago. Our speaker with long experience in criminal prosecution in the US mentioned that nowadays people are more aware of the interconnectedness of environmental crimes and other types of illicit acts, which can help in the process of investigation.

This case was prosecuted in the US using the Lacey Act, which makes it an offence in the US to import, receive, transport or sell in interstate or foreign commerce any fish or wildlife that has been taken, possessed, transported or sold in violation of any foreign law. Arnold Bengis, the owner of Hout Bay Fishing Industries, pleaded guilty. Later on, South Africa suggested that the financial gains of the illegal enterprise were far greater and claimed restitution for the loss suffered. For more information on the financial aspects of this case read the case study.

Thailand: Targeting a wildlife trafficker with money laundering charges

This case related to a major international wildlife trafficking network between Africa and Southeast Asia. It shows how prosecutors can use anti-money laundering laws to target criminal assets even if a criminal conviction cannot be achieved.

While there were difficulties in moving forward with the criminal case against the trafficker, the Thai Anti-Money Laundering Office (AMLO) was able to use its powers under Thailand’s Anti-Money Laundering Act to freeze, seize and subsequently recover millions of US dollars worth of assets, including vehicles and bank accounts. The case:

Shows the importance of exploring non-conviction based forfeiture mechanisms to seize and recover assets linked to environmental crimes, both alongside or without a criminal conviction.
Reveals the immense value that civil society organizations or NGOs can provide in conducting financial investigations in collaboration with government authorities – AMLO publicly recognized the support of the Freeland Foundation in pursuing the case.
Highlights the importance of cross-border and inter-agency collaboration, since “following the money” in transnational wildlife trafficking cases inevitably involves multiple countries and authorities. In this case, government agencies and NGOs from Thailand, Malaysia, Australia, the United States, and South Africa worked together and exchanged information during the investigation.

Indonesia: Forensic financial accounting to fight illegal deforestation

Illegal deforestation is a huge environmental and social problem in Indonesia and elsewhere. Innovative approaches are needed to tackle it. Could forensic financial accounting techniques help?

Forensic financial accounting refers to the use of investigative accounting techniques to uncover financial irregularities and fraudulent activities. It is a potentially powerful tool in cases of illegal deforestation linked to companies engaged in agricultural production or trade.

The case presented at the meeting was related to a commodity trader who faced accounting fraud allegations linked to, among other things, illegal deforestation in an Indonesian plantation certified by the Roundtable of Sustainable Palm Oil. As a result of the allegations, the company’s shares were suspended from trading on the Singapore Stock Exchange; it later defaulted on its debt and underwent a significant restructuring process.

Forensic financial accounting investigations are typically based on various international standards. The International Accounting Standard (IAS) 41 on Agriculture is relevant in the case of palm oil, a major economic activity in Indonesia. The standard prescribes the “accounting treatment, financial statement presentation, and disclosures related to agricultural activity.” It covers both biological assets (e.g., palm trees) and agricultural produce (e.g., palm oil or fresh fruit).
Additionally, the International Financial Reporting Standards cover how different types of financial transactions and events are reported in financial statements.
This highly technical field has the potential to trigger major pressure from investors, regulators and civil society on companies engaged in illicit or unsustainable practices involving forest exploitation.
Multistakeholder initiatives, such as the Roundtable on Sustainable Palm Oil in this case, can play an important role in increasing transparency and peer pressure on companies facing allegations of financial accounting irregularities linked to environmental degradation.

East Africa: Proactive financial investigations and open-source intelligence

Exploring a transnational wildlife trafficking case from East Africa highlighted the importance of looking beyond poaching to proactively investigate the financial flows linked to trading activity. Lessons learned included:

The value of proactively conducting financial investigations in cases of illegal wildlife trade – in parallel with criminal investigations – to uncover evidence and criminal connections.
How financial investigators can benefit from open-source intelligence (OSINT) to trace illicit financial flows and identify potential links between criminals on the supply/demand sides, facilitators and companies. (The Basel Institute’s free OSINT eLearning course is a good start.)
The need to expand the “follow the money” perspective to non-traditional financial channels such as hawala and cryptocurrencies, as wildlife trafficking criminals take advantage of new ways to hide and launder their money.

The case highlighted two common themes across Follow-the-Money Working Group meetings:

First, the importance of inter-agency and cross-border collaboration between law enforcement agencies on the financial aspects of illegal wildlife trafficking cases, covering information sharing, follow-the-money techniques and digital forensics.
Second, the value of collaboration between public, private and non-profit/civil society organizations to build capacity to conduct financial investigations and gather information and evidence from abroad.

Join us

This Working Group is open to new members interested in generating shared knowledge on “following the money” to address environmental crimes. Meetings are held on the third Wednesday of each month under the Chatham House rule. The main language of the meeting is English, with simultaneous interpretation available in Spanish and French.