Global Financial Integrity

 
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Congressional Testimony: From Timber to Tungsten: How the Exploitation of Natural Resources Funds Rogue Organizations and Regimes

Natural resources have long been used to finance conflict and violence, perpetrated by state actors as well as non-state actors like transnational criminal organizations (TCOs), terrorist groups, and armed groups. The focus on these crimes has traditionally been directed toward the overt activity and its obvious impact on the environment. It is only in the last ten years that the international community has really begun to recognize the scale of the IFFs associated with these activities as well as the impacts to economic and national security.

Illicit natural resource exploitation represents a low-risk, high-reward activity for participants. From Global Financial Integrity’s (GFI) 2017 report Transnational Crime and the Developing World, the retail value of environmental crimes—specifically wildlife trafficking, illegal logging, illegal and unreported fishing, illegal mining, and crude oil theft—was more than US$275 billion each year. This makes environmental crime the third most valuable transnational crime behind counterfeiting and drug trafficking, and it must be stressed that this is absolutely a conservative estimate.

The exploitation of natural resources to finance illicit activity is a serious threat to the U.S. and its allies as it funds rogue actors and regimes, undermines legitimate business, and contributes to conflict, corruption, transnational crime, and terrorism. The June 2021 FATF report Money Laundering from Environmental Crime highlighted what many of us in this community have known for a long time: that trade-based fraud, shell and front companies, as well as gatekeepers play a “significant role” in both facilitating these crimes as well as laundering the related proceeds.

Recommendations:

  1. Expand laws and regulations surrounding natural resource reporting to encompass a wider geographic and species/commodity focus.
  2. In regards to the Corporate Transparency Act, FinCEN should broadly interpret “other similar entities” to include partnerships, sole proprietorships, trusts, foundations, and business associations,  unless a particular entity qualifies for an exemption.
  3. Extend AML/CFT regulations to gatekeepers that are currently uncovered or exempted.
  4. Create a public-private partnership between applicable U.S. government agencies, businesses engaged in natural resources exploitation, financial institutions and other relevant stakeholders.
  5. Improve efficacy and efficiency of Trade Transparency Units (TTUs).