Financial Transactions & Services Indicators

Criminals co-mingle illegal and legal proceeds, placing funds generated from environmental crimes into legitimate business accounts. This exposes financial institutions to criminal clients seeking to intermix and hide illicit proceeds. Often, criminals will present illegal earnings as legitimate earnings from a legal business activity they also undertake in tandem, making it harder to identify and differentiate illegitimate funds or activities from legitimate ones.

Complex networks of intermediaries, such as nominees or custodians can be exploited to disguise beneficial ownership of a bank account, investment vehicle, or other financial instrument. This strategy is designed to avoid detection and to prevent such accounts from being linked back to criminal activity.

Corporate entities with no significant assets or legitimate business operations are used to launder the illicit proceeds of environmental crime, facilitate illicit trade, purchase clandestine assets, or obfuscate the beneficial ownership of financial assets held in their name.ownership of a bank account, investment vehicle, or other financial instrument. This strategy is designed to avoid detection and to prevent such accounts from being linked back to criminal activity.

Criminals can manipulate financial transactions to avoid detection by financial institutions (FIs). This technique is often used to avoid triggering reporting thresholds that FIs must follow, as well as to layer illicit funds and obscure the source of those funds. Creating a high volume of complex transactions can overwhelm monitoring systems and investigators, making it more difficult to spot patterns indicative of money laundering.

Bank and wire transfers can disguise the movement of illicit funds, with third-party accounts and masking payments appearing as legitimate transactions for goods or services. These payments are typically crafted to align with the commercial activity of the sector in which the criminal operates – such as agricultural commodities or legally sourced minerals – to reduce suspicion. It is therefore important for FIs to monitor who their clients are transferring money to, to see if funds are going to individuals or entities with higher risk characteristics, such as offshore accounts or newly established companies with no clear legitimate business operation.

Systems like Hawala or Fei Chien (飞钱) - are commonly used mechanisms for transferring financial value outside of the formal banking system. While most MVTS businesses serve legitimate purposes, they are also vulnerable to abuse by criminals seeking to launder proceeds from crimes. Because MVTS often operate without formal licensing or recordkeeping, they can enable the movement of large sums of money without leaving a paper trail. MVTS are also commonly used to move money across borders, allowing for individuals to move money abroad without regulatory or FIs oversight. Notably, traditional banking access is limited in remote, under-regulated regions – particularly parts of East and Central Africa – where cash-intensive operations are common. Since MVTS are already widely used for legitimate transactions in these areas, criminal use of these systems may be less likely to trigger immediate detection.

Shadow banking entities and activities can include a wide range of FIs and instruments, such as the use of peer-to-peer lending or other fintech platforms, private investment funds, and limited-purpose finance companies that are operating outside the scope of standard banking oversight. These entities may not be subject to the same customer due diligence or reporting requirements as regulated banks, making them attractive for those looking to obscure the origin or destination of criminal proceeds.

Criminals move illicit funds out of a country through a web of layered transactions involving shell companies, intermediaries, or informal financial networks. The money is then reintroduced into the country of origin, typically in the form of foreign direct investment, giving it a veneer of legitimacy. This method can be especially attractive because it can allow criminals to take advantage of tax incentives as well. For example, illicit proceeds could be laundered through offshore accounts and then later used to purchase real estate in the origin country or shares in a legitimate business under the guise of foreign portfolio investment.

Criminals engaging in environmental crimes often seek to convert illicit cash proceeds into high-value, portable assets, such as jewellery, luxury goods, and art. These assets serve multiple purposes: they store value, facilitate cross-border movement, and are often less scrutinised by regulators and FIs, especially in regions with weak oversight. These purchases may take place through layered transactions using front companies or third parties, further obscuring the original source of funds. FIs should remain aware of clients purchasing high-value assets, especially if inconsistent with a customer’s profile, as the purchasing funds could be the proceeds of a crime such as illegal mining or wildlife trafficking.

While still a less commonly used mechanism, cryptocurrencies and other digital currencies are increasingly used by criminals engaging in illegal mining, wildlife trafficking, and other environmental crimes. These currencies appeal to criminals due to their decentralised nature and ability to facilitate fast, cross-border transfers without the same financial oversight as banks. Criminals use various methods to launder assets through crypto, such as using crypto mixers or tumblers (which break large transactions into smaller units and blend them with other users’ funds), chain hopping (where illicit actors rapidly transfer assets across multiple blockchain networks), and peer-to-peer exchanges or unregulated exchanges.

Cash-intensive businesses (e.g. restaurants, construction firms, agricultural suppliers) are often exploited to move and disguise illicit proceeds. These businesses, which typically generate large volumes of physical cash from legitimate activity, can serve as convenient fronts to integrate illegally earned money into the formal financial system.