Given the pervasiveness of financial crime linked to environmental crime, and the many ways in which various industries across the globe are exposed, the private sector has an essential role to play in identifying and reporting activity linked to these criminal practices.
This is primarily done through the submission of suspicious transaction reports (STRs) or suspicious activity reports (SARs), which are widely used to report certain types of financial or predicate crime but have so far been severely underused in relation to environmental crime.
Although different countries have specific suspicious transaction and activity reporting requirements, under most countries’ legal frameworks, businesses are obliged to report transactions where there is suspicion that the proceeds are related to a crime, or that funds are to be used to commit, conceal, or benefit from a crime.
Each STR/SAR, although it may seem individually insignificant, contributes to the bank of information being accumulated by countries’ FIUs. As the Council of Europe has noted, “parallel financial investigations [...] are one of the effective tools to identify larger criminal networks”, including those behind environmental crimes. Failing to ‘follow the money’ may lead to cases where low-level perpetrators are prosecuted while higher-level operatives remain under the radar, making financial investigations a critical tool in tackling environmental crimes on a holistic scale.
This information serves not only as vital evidence in individual criminal cases, but also as a dataset from which new trends in illicit finance can be identified. Financial Intelligence Units (FIUs) are responsible for producing actionable financial intelligence; this information is used to prosecute criminals, ensure national security, and identify new patterns in the ever-evolving threats of organised crime and terrorism. STRs/SARs are not only key contributors to improving FIUs’ understanding of the threats and vulnerabilities present in the global financial system, they also produce tangible results, leading to the arrest of criminals and the seizure of illegal assets.
Statistics from the UAE’s FIU, for example, demonstrate the effectiveness of STRs/SARs. In 2022, money laundering investigations by UAE law enforcement confiscated over AED 3 billion; approximately 45% of these investigations were instigated by intelligence disseminated by the FIU. STRs/SARs played a key role in generating this financial intelligence: in 2022, the FIU received over 38,000 reports of suspicious activity, more than double the number received in 2020.
The FATF reports that only a small number of STRs/SARs submitted globally relate to environmental crimes. It highlights that in one country – unnamed but described as having one of the highest deforestation rates in the world – less than 1% of STRs/SARs received from 2015 to 2019 were linked to illegal logging and land clearance. Furthermore, according to a 2024 report from the US-based Financial Accountability and Corporate Transparency (FACT) Coalition, over the past decade, only one in three environmental crimes in the Amazon region included a parallel financial investigation. Cases like this indicate the existence of a vast gap between the reality of environmental crime on the ground and its perceived or acknowledged levels. This trend of underreporting is concerning as STRs/SARs provide FIUs, regulators, and law enforcement authorities with crucial information to help identify, understand, and address financial crime.
There are indications that this trend may be changing, as the international community and regulators pay increasing attention to the nexus of environmental and financial crimes.
The FATF Recommendations, which are the international standard for anti-money laundering regulation, have, since October 2021, included in their list of designated categories of offences: “environmental crime (for example, criminal harvesting, extraction or trafficking of protected species of wild fauna and flora, precious metals and stones, other natural resources, or waste)”.
Businesses should not fulfil their reporting duties purely out of a sense of bureaucratic necessity or compliance-related box-ticking, however. The submission of STRs/SARs offers the private sector a chance to play an active part in tackling environmental crime.
The quality of an STR/SAR is crucial to its usefulness. It is perhaps understandable that a business might be tempted to protect itself by filing STRs/SARs ‘defensively’ (filing reports on activity it does not truly consider suspicious, or has not fully investigated, to technically meet its legal obligations). This practice is, however, fundamentally detrimental to the basic functioning and purpose of the national and international anti-money laundering system.
Furthermore, FIs should have the internal preparatory mechanisms in place to enable them to effectively identify red flags and raise STRs/SARs. As identified in Themis and WWF’s research on financial institutions’ responses to financial crimes, having environmental crime specific internal screening, policies, and training in place is highly correlated with financial institutions’ ability to raise STRs/SARs in response to illicit activity. The information provided in this toolkit can help financial institutions to establish these internal mechanisms.
Data fields should be filled out as carefully and accurately as possible, with reporters double-checking the details of their submissions.
The most important section of a report is its description or narrative. It should include a comprehensive account of the activity or transaction in question, with information on the background to the report and a description of the parties involved.
The purpose of the description is to outline the reasons why transactions or activity are suspicious. It should aim to answer six key questions:
Who is involved in the suspicious activity?
What exactly is being done?
When did it take place/for how long has it been taking place?
Where is it being done?
Why is/was this activity carried out?
How is it being done?
In addition, the description should include a list of any red flags for criminal activity – the inclusion of direct references to financial and predicate crime typologies/indicators is very helpful for the supervising authority and the FIU to organise and link together their databases.
It is essential for businesses to keep in mind that STRs/SARs are highly confidential documents, to be shared only with the FIU and the relevant supervisory authority. It is vital that businesses do not deliberately or inadvertently tell (”tip off”) their clients – or, indeed, anyone involved in an STR/SAR – that they are under suspicion. In doing so, they run the risk of jeopardising any investigation and are also liable to legal penalties of fines and imprisonment.
After submitting an STR/SAR, the related customer or business relationships should immediately be classified as high risk. This may result in a business wishing to terminate its relationship with a customer. If the relationship is continued, the business should conduct appropriate risk-based enhanced due diligence and implement ongoing monitoring procedures. The need to preserve the confidentiality of an STR/ SAR remains, however: businesses may choose to not conduct enhanced customer due diligence investigations if they consider that the process might tip off a customer about their suspicions.
Once a reporting entity has submitted its STR/SAR, the FIU may respond with requests for further information, or it may give the reporting entity instructions on continuing transactions with and monitoring the suspected client. Often, however, the FIU will offer no response to a report of suspicious activity. In such cases, it is the business’s own responsibility to conduct a proper post-report process.
The Environmental Crimes Financial Toolkit is developed by WWF and Themis, with support from the Climate Solutions Partnership (CSP). The CSP is a philanthropic collaboration between HSBC, WRI and WWF, with a global network of local partners, aiming at scaling up innovative nature-based solutions, and supporting the transition of the energy sector to renewables in Asia, by combining our resources, knowledge, and insight.
