VIDEO: Environmental Money Laundering
In this Compliance Clip (video), Adam discusses an emerging money laundering trend, environmental money laundering. While this information doesn’t come from FinCEN directly, it did come from the Financial Action Task Force (FATF), and therefore, is good information for every BSA professional to consider.
Video Transcript
The following is a transcript of this video:
This Compliance Clip is going to talk about Environmental Money Laundering. Environmental Money Laundering is something that has been brought up recently, not by FinCEN but by the Financial Action Task Force or FATF. The Financial Action Task Force is a group of nations – 36 nations last time I checked – that come together to provide international standards for any Money Laundering laws and rules and regulations in each country. When FATF have talks about something that they want to happen, that usually trickles down into each country.
Again, this is not something that was brought up by FinCEN, but this is really an international anti-money laundering trend looking at Environmental Money Laundering. In fact, this comes from a September 30th, 2021 webinar where FATF held this webinar on Money Laundering from Environmental Crime. They talked about how this is a growing trend worldwide and something that countries should be looking at and any money laundering initiatives such as that in your financial institution should be looking at and watching out for. This is a really cutting edge type of thought process for you as a BSA professional. It's just something to think about in your organization.
This webinar was done in a Zoom format where they had a number of panelists and some of them had very strong accents. Some of them even forgot to hit the mute button because they kept talking (mutes audio). That was my mute button there. Anyway, it was a Zoom format and it wasn't the most exciting thing, but there were some things that were definitely a takeaway for financial institutions and BSA departments. So if you're not a BSA specialist or a BSA officer, you might want to pass this video on to your BSA department for them to take a look at because you could share this video for free with them, no problems at all.
This webinar that took place on September 30, 2021 was discussing red flags to help detect and trace the illicit financial finances of criminals engaged in environmental crime. These are red flags relating to Environmental Money Laundering. There's a number of things that probably don't apply to most of my audience because most of my audience is smaller financial institutions, maybe community banks and credit unions, and others of you like when you service businesses or even mortgage lenders. So there are some things that probably won't apply if you're a smaller institution and really only have a few locations, probably not located on a border of the United States.
What they brought up and talked about the most was Trade-based Money Laundering. Trade-based Money Laundering in this arena is the illegal mining of precious metal then taking that illegal precious metal that was mined illegally across the border and then somehow putting it back into the financial system. The way they would typically do that is they’re mining in a country where it's illegal to mine a certain metal. They mine that metal then they would somehow ship it across the border, either through the jungle or through truckloads that have other things on them, but ship the raw material across the border where they would then combine that illegally mined precious metal with legally mined precious metal, then ship it out making it look legal. They said, some of the ways we detect this is you should have an idea of how much of a precious metal a mine can produce. If there's a big influx, that's a good chance there's Trade-based Money Laundering.
Again, that's not really going to apply to smaller financial institutions but it's really interesting how they were talking about the combining of metals, how illegal metals combined with legal metals makes it very difficult to know, if there is an illegal parts in there, but they can use some chemistry tests to determine where some things came from. It's interesting but it doesn't really apply to our community banks or credit unions or other smaller financial institutions.
What could potentially apply in what they talked about in this webinar, the end of September of 2021, is about illegal dumping and illegal recycling and waste management. This is something that can happen in any country and it is something that has happened here in the United States. In fact, several years ago – I explained this story in our BSA email update – but several years ago, I saw an article coming out of Colorado. I think it was either an article or a special on TV, something about that that caught my eye because there was a company that was advertising that they will recycle your electronics at a very low fee. I don't know about you, but I ran into this problem where I collect electronics because I don't know where to get rid of it. I have discovered, I have a lot of Apple products, I could send all my old Apple products to Apple. We've got old phones that don't work – iPads, iPods, and those types of things – they're just so out of date, there's no resale value, I can send them to Apple and they will recycle them. I've been collecting them for years because of not knowing what to do with them. I don't want to throw them away because that's bad for the environment and I don't want to hand them to anybody because I've cleaned my drives but I just don't want to pass them out to anybody for privacy purposes. So it's been a challenge for me to understand what to do but if I saw this company who was based out of Colorado, I think it was in Denver, advertising that they would take care of my electronics and recycle it so that it's environmentally friendly and I don't have to handle it, there's privacy concerns, privacy protections, and all that, I'd probably consider signing up. What this article or news release that I saw said was that many people signed up for this, paid the company and shipped them their electronics. But instead of actually recycling electronics, what they did is they bought dumpsters and they literally threw the electronics away. So the FTC got on top of them. They basically said, this is unfair, this is a deceptive act and practice, you're not doing what you said and there's environmental concerns, blah, blah, blah. So it was a big problem.
That's exactly what they're talking about when it comes to Environmental Money Laundering. You may run into somebody who is claiming to do environmental recycling or waste management in a proper way but in fact, they're doing illegal dumping or illegal waste management when they should be recycling. Maybe they're violating Federal Trade Commission's requirement on deceptive acts and practices. Or maybe they're just dumping it in the field and dumping in the ocean. Those types of things are the things that could apply to you and a smaller financial institution in the United States.
What was really interesting about this is they said that financial institutions would never do business with some industries that have shady practices and shady activities. We understand there are certain industries we steer clear of. When it comes to BSA, we just don't want to get near those industries. We don't cross industry saying, no, we're not going to do business with you, but we understand the risk. We do a lot of due diligence in certain industries. However, what they're saying is that when it comes to some businesses in the environmental industry, like waste management or recyclers, most financial institutions don't think twice. They don't think of BSA and Money Laundering in relationship to waste management. Some of us do from the perspective of there's a lot of cash transactions, but beyond that, we don't think of illegal dumping or illegal recycling, and it doesn't actually happen, but they're challenging us to pay attention to that and to think about it because Environmental Money Laundering is a growing trend of the BSA/AML world.
Again, this is a topic that is right out of our BSA Annual Update. We share all kinds of things, just like this in our BSA Annual Update. So if you're interested in that program, it's available in our store at compliancecohort.com/store. That's all I have for you today.