Article
Illegal wildlife trade and its implications for Switzerland
Preserving Nature's Wealth: Safeguarding Switzerland's Financial Integrity against Wildlife Crime
Switzerland is not immune from the risk of facilitating the financial flows and transactions of the illegal wildlife trade (IWT)1 and thereby contributing to the resulting legitimisation of illicit gains. IWT involves trafficking of protected species, mostly from the African continent to Asia, by organised crime networks operating internationally and jeopardises the world’s ecosystems and global security2. Recognising the risks is crucial to help counter the trade and in doing so protect the integrity of the Swiss financial system.
Background
Illegal wildlife trade poses a complex transnational challenge, demanding collaboration across the private and public sectors. Environmental crime is estimated to be the fourth most profitable crime globally, behind narcotics, counterfeiting and human trafficking.3 Annual estimated economic losses due to illegal wildlife trade, fishing, and logging, including foregone natural resources, affected ecotourism, and tax losses, range from US$1 trillion to US$2 trillion.4 The illegal trade in wildlife fauna alone, such as ivory and pangolin scales, has been estimated to generate between $5bn and $23bn annually5 in criminal proceeds, posing threats to ecosystems, global peace, and public health through the emergence of new zoonotic diseases.6 Consumer demand for illicit wildlife products encompasses various markets, including exotic pets and food, traditional medicines, and status symbols such as art and ornaments.7
IWT undermines the achievement of the United Nations Sustainable Development Goals and for criminals it is considered “low risk, high reward” due to minimal detection rates. It is a key cause of the loss of biodiversity and extinction of species and imposes risks on economic development and security of affected areas.8 IWT is also linked to other serious organised crimes such as money laundering, human trafficking and corruption.9
The financial sector has a critical role to play in interrupting the flow of illicit funds. By scrutinising transactions and implementing robust due diligence practices, financial institutions can contribute to break the infrastructure that fuels wildlife crime.
Switzerland - Safeguarding the banking system against exploitation
Given the global prominence of the Swiss banking system, there is a growing concern that Swiss financial institutions might unknowingly legitimise transactions originating from IWT, merely by processing them. To mitigate this risk, Switzerland should implement robust controls and policies to safeguard the integrity of its banking system.
The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), established in 1975, regulates the trade in over 40 000 species of animals and plants.10 Switzerland was one of the first countries to ratify and implement the agreement11 and it enforces CITES rules through the 453 Swiss Federal Act on Trade in Animals and Plants of Protected Species.12 Under the Swiss Criminal Code, bribery of foreign officials, often associated with illegal wildlife trade, is considered a predicate crime for money laundering. Criminal networks engage in a variety of corrupt practices, like obtaining false permits, disrupting criminal investigations, and facilitating the illegal movement of wildlife.13 Despite strengthening local laws and increasing fines for IWT-related crimes14, there does not appear to be a specific legal obligation for Swiss financial institutions to include IWT factors in their illicit finance risk frameworks.
Due diligence in Swiss financial institutions – Points for attention
Inter-governmental bodies, including the Financial Action Task Force (FATF), have urged financial institutions to identify, assess, and take action to address the money laundering risks associated with IWT.15 When assessing their risk exposure, compliance officers should consider IWT high-risk entities and industries, such as:
Operating under the Royal Foundation of the Prince and Princess of Wales, the United for Wildlife Financial Taskforce has developed an IWT Risk Assessment for its members, in close collaboration with Deloitte.16 The assessment helps banks and other institutions to evaluate their programs and benchmark best practices. Complementing existing processes with a standardised assessment can increase coherence across the industry, enhance control effectiveness and disrupt illicit financial flows.
Collaboration through public-private partnerships - A vital step to combat IWT
To combat illicit wildlife trade effectively and capture the criminals involved, information sharing across public and private sector organisations is needed. Public-private partnerships (PPPs) serve as a vital way of fostering collaboration and information sharing among financial institutions, law enforcement agencies, government policymakers and regulatory bodies.
One method of facilitating information sharing is through the establishment of a collaborative platform, where data such as trafficker names and anonymised transaction data related to IWT can be shared among financial institutions and public sector bodies. Sharing data and enriching client information can result in a more meaningful alert generation, the development of corresponding typologies and laying the foundation for a comprehensive IWT framework.
Working collectively to expand current PPPs, while leveraging the existing channels used for AML or fraud risk detection, could lead to the creation of a reliable source on IWT criminals, an "IWT blacklist", similar to official screening lists for AML-related names, sanctioned individuals or PEPs. Currently, only prolific traffickers appear on certain screening lists, leaving lesser-known associates and traffickers undetected. Due to a seeming lack of unity among financial institutions regarding the level of detail and preferred sources, a proposed ‘IWT blacklist', continually updated by participating stakeholders, could represent a major step forward in combating illegal wildlife trade.
Together with the Royal United Services Institute (RUSI) and other partners, Deloitte has engaged in diverse initiatives across various jurisdictions aimed at facilitating information sharing for AML and fraud purposes. 17 Broadening the existing intelligence sharing capabilities to encompass illegal wildlife trade has the potential to enhance significantly the effectiveness of IWT investigations. Pilot projects making use of PPPs have shown promising results, as highlighted in publications by Deloitte18 and RUSI.19
Whether and to what extent PPPs will be established and developed will likely determine the level of success the financial services industry can achieve in combating illegal wildlife trade.
Is your organisation prepared to fight illegal wildlife trade?
This fight cannot be fought alone: Implementing effective controls and collaborating via PPPs helps detect, prevent, and remediate the facilitation of transactions related to illegal wildlife trade; giving a voice to endangered species, and safeguarding our natural heritage for generations to come.
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References
1 For the purposes of this report, illegal wildlife trade refers to supplying, selling, trafficking or buying of wild fauna and flora in contravention of national or international law. For more information see the Wildlife and Forest Crime Analytic Tool Kit prepared by the International Consortium on Combating Wildlife Crime.
2 UNODC. World Wildlife Crime Report 2020: Trafficking in Protected Species. 2020.
3 | 9 Nellemann, C., Henriksen, R., Kreilhuber, A., Stewart, D., Kotsovou, M., Raxter, P., Mrema, E., and Barrat, S. (Eds).
The Rise of Environmental Crime – A Growing Threat To Natural Resources Peace, Development and Security. RHIPTO. 2016.
4 Montero, M., Jose, J.,Elisson M, W., Muhammad Najeeb, K.
Illegal logging, fishing, and wildlife trade: The costs and how to combat it. World Bank Group. 2019.
5 Global Financial Integrity. Transnational Crime and the Developing World. 2017.
6 | 8 UNODC. World Wildlife Crime Report 2020: Trafficking in Protected Species. 2020.
7 UNODC. World Wildlife Crime Report: Trafficking in protected species. 2016.
10 CITES. “speciesplus.net.” Last accessed August 24, 2023.
11 CITES. “cites.org > Parties > Country profiles > Switzerland.” Last accessed August 29, 2023.
12 Swiss Confederation. “453 Bundesgesetz über den Verkehr mit Tieren und Pflanzen geschützter Arten (BGCITES).” March 16, 2012.
13 TRAFFIC. Initial analysis of the financial flows and payment mechanisms behind wildlife and forest crime. 2020.
14 Federal Department of Home Affairs (FDHA). “Tougher penalties for illegal trade in protected plants and animals.” Press release, January 26, 2022.
15 Financial Action Task Force (FATF). Money Laundering and the Illegal Wildlife Trade. 2020.
16 Robinson A., Sutton, R. Combatting illegal wildlife trade. Deloitte. 2023.
17 | 19 Future of Financial Intelligence Sharing (FFIS) and Royal United Services Institute (RUSI). A Survey and Policy Discussion Paper: “Lessons in private-private financial information sharing to detect and disrupt crime.” 2022.
18 The Institute of International Finance and Deloitte LLP. The global framework for fighting financial crime: Enhancing effectiveness and improving outcomes. 2019.
