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USING DATA SCIENCE AND AML TO REDUCE THE ILLICIT WILDLIFE TRADE

The Illegal Wildlife Trade (IWT) is the fourth largest illegal trade after firearms, drugs, and human slavery, according to the United Nations Office on Drugs and Crime. And it’s no wonder with profits generated from poached animals and timber estimated to be between US$7-23 billion per year.

To reap the rewards, wildlife criminals have to legitimise their illicit gains by using techniques common to other forms of serious crime to enable them to access the global financial system. Therefore, one way to reduce IWT is to cut off their profits. T

 

his is critical as it is widely recognised that IWT is a significant threat to many species and poses a major challenge to global biodiversity conservation efforts. According to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), IWT is estimated to involve hundreds of millions of individual plants and animals, with thousands of species affected. Some of the most commonly trafficked species include elephants, rhinos, tigers, pangolins and various species of reptiles and birds. Many of these species are endangered or threatened, and the illegal trade in their parts and products can have severe ecological, economic, and social consequences. The killing of wildlife for trade can disrupt ecosystems, cause population declines, and reduce the genetic diversity of species. It can also have significant economic impacts, such as reduced tourism revenue and increased law enforcement costs. Added to this is the laundering aspect.

 

To address this, three years ago the World Wildlife Fund for Nature (WWF) forged a global partnership with Association of Certified Anti-Money Laundering Specialists (ACAMS), the largest international anti-money laundering and financial crime prevention community in the world. This resulted in the launch of a specialised certification program to train individuals to detect, identify and report suspicious or unusual transactions that may be linked to IWT.

 

As criminals get increasingly creative and expand their illicit activities, innovative solutions need to offer better capability in identifying risk within the financial sector by enhancing systems to better detect IWT red flags in financial flows.

A Red Flag is a regulatory-referenced indicator that highlights potential illegal activity in a bank account. Red Flags are created from the knowledge and understanding of patterns that emerge from the analysis of criminal transactional activity. They are then defined according to regulation and guidance notes and assigned to a specific financial crime typology, such as the IWT.

 

One of our partners, have developed a ground-breaking Red Flag Test solution designed to carry out an on-the-spot transaction monitoring system health check. The innovative tests identify vulnerabilities in a transaction monitoring system’s alerting capabilities and validate Red Flags associated with IWT providing the financial industry with a thorough understanding on how to better detect illicit activity.

 

Whilst, ultimately the reduction of IWT must be part of a broader strategy that includes effective law enforcement, international cooperation, and public awareness campaigns, the introduction of Red Flags in the finance sector could be a significant step in reducing IWT as it can help to detect and prevent financial transactions related to such illegal activities. By identifying suspicious transactions and highlighting potential Red Flags, financial institutions can take proactive measures to prevent the flow of funds associated with IWT. The exact extent to which the introduction of Red Flags in finance could reduce IWT is difficult to estimate as it depends on various factors, but studies have shown that financial institutions will play a crucial role. For example, a report by the Financial Action Task Force (FATF) highlighted that the use of cash in IWT transactions is declining, with a shift towards the use of digital payment systems and other financial channels. In fact, between 30-50% of transactions involve banks, money transfer companies or other formal financial channels, so the introduction of innovative new Red Flag tests will be an essential step in reducing IWT and this increasingly global issue.

For more articles relating to AML you may like to read Driving Efficiency in Sanction Screening.

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