Global Financial Integrity

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Why Wildlife Trafficking and Anonymous Companies Are Mutually Inclusive


Elephant ivory is a key product in wildlife trafficking

Any Effective Effort to Save Rhinos, Tigers, and Pandas from Extinction Must Tackle the Anonymous Companies that Propel the Illegal Wildlife Trade

Wildlife trafficking is more than illegally killing exotic animals; it is part of a complex criminal network that makes use of anonymous companies to illegally transfer both goods and money.

The illegal wildlife trade consists of the poaching, sale, and trade of exotic wildlife. Animals are used for food, medicine, commercial products, and even as pets. The illegal trade hosts a bevy of clientele in both developing and developed countries.

We probably all know that wildlife trafficking can be grisly and disturbing. Rhino horns are hacked off, turtles are stuffed into suitcases, and bear gall bladders are milked from living animals. The impact on biodiversity is astounding. According to our 2011 report, Transnational Crime in the Developing World, only 500,000 elephants exist today compared to a population of 1.2 million in the 1970s. The world’s tiger population has plummeted to just 3,200—down 95 percent since 1900, and an entire species of Rhino went extinct in 2009.

Yet, wildlife poaching is made possible—indeed is propelled—by an opaque global financial system. The transnational criminal smuggling business is a clandestine, multi-billion dollar industry that operates with the help of hundreds of anonymous shell companies. Wildlife trafficking alone generates around US$7.8 to US$10 billion in revenue a year—making it the fifth largest criminal industry worldwide—and layers of phantom firms are behind such finances that send tiger skin rugs and elephant ivory across borders.

Of course, this is not unique to wildlife poaching.  These anonymous entities facilitate everything from sex slavery to kleptocracy to terrorist financing.  As the U.S. Department of Justice has noted, anonymous companies “are the No. 1 vehicle for laundering illicit money and criminal proceeds.”

Unfortunately, anonymous shell companies run rampant in the United States due to lax regulations and state statutes. The U.S. still does not require the collection of meaningful “beneficial ownership” information on the true, human owner of each company. Therefore, lucrative criminal activity such as wildlife poaching is difficult to track. Thus, it continues in a vicious cycle: Animals are killed and sold, money is wired through anonymous companies, where it is then used to finance more wildlife trafficking.

The ease at which an anonymous shell company can operate in the international financial system contributes to the success of wildlife trade.  A well-financed illegal wildlife industry has many underlying impacts, each of which points back to anonymous shell companies.

A Threat to Security

In his written testimony before the U. S. Senate Committee on Foreign Relations discussing the global security implications of poaching in Africa, GFI’s Tom Cardamone testified that the illegal wildlife trade is a massive money making tool for criminals.

He noted:

In recent years, organized crime syndicates, militias, and even terrorist elements have taken notice of the profits that can be made in the illegal trafficking of wildlife, generating an alarming up-tick in the scale of the industry and posing serious national security concerns for the United States and our partners.

A recent report by the United Nations Environment Programme and INTERPOL suggests that terrorist groups such as Al-Shabab have become increasingly involved in wildlife trafficking. Likewise Sudan’s Janjaweed militia has allegedly been active in the poaching of hundreds of Elephants in Chad’s Zakouma National park. According to our research, the funds from the illegal sale of the ivory were used to purchase AK-47s, which, in turn, were used to continue the genocide in Darfur.

Anonymous companies are often used by arms dealers who provide animal traffickers with tools to continue the trade. Notorious “Merchant of Death”,Viktor Bout, used 12 anonymous shell companies in the U.S. to sell arms to criminal groups. They were each given innocent names such as “Central African development fund” and “Orient Star corporation”.

A Threat to Development

Money earned from the illegal wildlife sale, and layered in anonymous shell companies, also contributes to the roughly US$1 trillion in illicit financial outflows from developing countries each year.

According to our research, developing countries feel the impact of wildlife poaching more than other regions of the world. Illegal wildlife trafficking has a clear impact on eco-tourism, which many developing countries rely on as a significant boost to their GDPs. It also contributes a great deal to the transmission of disease from place to place, which can spread faster in and take a larger toll on poorer countries with weaker healthcare and sanitation systems.

Still, the most pernicious impact of the illegal wildlife trade is its direct role in destabilizing a country’s development. Wildlife trafficking benefits more from poor infrastructure, weak rule of law, poor regulatory capacity, and higher levels of corruption.  So, those involved in poaching are often directly opposed to increased development, which could slow down their “business.”

Rich countries are also complicit in contributing to the underdevelopment by keeping in place the system to incorporate anonymous companies which in turn finance wildlife trafficking and other illegal activities. A report by the World Bank found that the United States was the favored location for corrupt individuals looking to set up an anonymous shell company, and another recent report found that the U.S. was the second easiest place in the world, behind only Kenya, for criminals and terrorists to incorporate an anonymous shell company to carry out their various misdeeds.

Mutually Inclusive

Illicit wildlife trafficking is a business; it’s about the money, and you’re never going to curtail it unless you go after the finances that facilitate it.

Simply put, ending anonymous companies, through the establishment of central public registries of beneficial ownership information, would have an enormous effect on curbing wildlife trafficking, among myriad other crimes. It would significantly hinder the abilities of criminal organizations around the world.

Join us in the call to end anonymous shell companies. Money motivates the worst of wildlife traffickers. To stifle that flow of money through anonymous companies is to put a serious damper in wildlife crime.

Image: Flickr / Some Rights Reserved by  USFWS Mountain-Prairie