Tracing the COVID-19 Supply Chain: Wildlife Trafficking

Welcome to RDC Insider Insights. This monthly series covers a multitude of modern-day financial crimes. We’ve analyzed our global datasets to understand how certain types of crimes and risks are changing over time, both globally and in regional splits, to uncover trends and provide insights.

“Saving the Pangolin” is not just an animal rights issue. It’s about preserving our health and protecting the financial markets.

FATF’s decision to make wildlife trafficking a priority for 2020 is proving to be even more imperative considering the coronavirus pandemic, as recent studies have investigated a potential link to the Pangolin, a highly sought black-market critter. Pangolin scales are used in traditional Chinese medicines, while its tender meat is a culinary delicacy. However, its perceived benefits may vanish if it is found to be the source of this urgent global health crisis.

Pangolin Captures Rising in GRID since 2015

Figure 1: Increased concern over wildlife trafficking since 2015

Figure 1 shows all Pangolin trading was banned by CITES (Convention on International Trade in Endangered Species) in 2016. The 2020 capture rate is already projected to surpass that of 2019, in part due to FATF prioritizing laundered proceeds from wildlife trafficking. Meanwhile, enforcement has increased in the Asia-Pacific region due to the likelihood of COVID-19 stemming from the open-air market presence of illegally traded wildlife products.

The public health threat is just one consequence of the illegal wildlife trade, but it might be the push necessary for regulatory bodies to enforce trafficking policies, as its impact on financial markets has been overlooked in the past. The neglected severity of wildlife trafficking has allowed traders to reap high rewards at low risk for years. Nevertheless, this market is not to be trivialized. Animal and natural resource trafficking is estimated to yield up to $259 billion in laundered funds each year and is the fourth largest criminal area in the world after drugs, arms, and human trafficking. In many ways these markets overlap via supply chain smuggling routes, or they are contingent upon each other. For example, poppy seed smuggling falls under the umbrella of illegal plant trade, but this resource is essential to la chaîne opératoire (production chain) of heroin, thus shifting into the illicit drug market.

Trafficked Species and Associated Codes, since 2015

Figure 2

As Figure 2 shows, smuggling and environmental crimes are the top codes associated with wildlife trafficking. Nevertheless, organized crime (ORG), arms trafficking (IGN), human trafficking (TRF), and drug trafficking (DTF) are heavily intertwined with this facet of the black market. Other associated crimes include tax evasion (TAX), fraud (FRD), counterfeiting (CFT), theft (TFT), and murder (MUR).

Wildlife trafficking is an organized financial crime, intrinsically linked to money laundering and tax evasion. Meanwhile, it is nuanced by the advances in how these networks operate on an international level. Social media and virtual marketplaces have facilitated the ease of transfer between poachers and consumers, thus posing new threats that require developing online monitoring strategies. As these practices improve, we expect to see a higher association between wildlife trafficking and cybercrime prosecutions.

Criminal Chain of Environmental Crimes:
Poacher –> Smuggler –> Broker –> Exporter/Importer

Illegal wildlife products begin in resource-rich regions home to populations of diverse and exotic—in market terms, endangered and highly demanded—species. Because of their rare value, these species may end up in any country through black market trading systems.
As enforcement of wildlife trafficking legislation and international treaties varies, certain areas show higher rates of prosecuted cases than others. In Africa, wildlife hunting has severely undermined sustainable development goals. An initiative led by the UN and the Africa Prosecutors Association toward capacity-building has allowed for greater enforcement of wildlife regulations. This both sustains African natural resources while cutting off illegal wildlife trade before species leave their natural habitats. In South Africa, investigators were able to crack down on lobster over-harvesting headed to seafood markets in the US.

Pangolin trade 2020 through YTD

Figure 3: Capacity-building in Africa has made Namibia the top country for Pangolin trade convictions over India for the first time since 2015.

Demand for illegal wildlife products varies. Although Pangolin demand is rooted in traditional medicine and culinary prestige, other species are valued for hides or skins in fashion and décor, or pet companionship and performance. Rare wood serves the pulp and paper industry. In destination countries, restaurants serving endangered delicacies launder illicit products through our own digestive systems. Reducing supply requires incentivizing sellers to seek licit means of profit.

Scroll to the bottom for infographics specific to big cat and elephant trafficking

Stopping Wildlife Trafficking: The Major Implications

Reducing wildlife trafficking, according to Traffic, the wildlife trade monitoring network, includes two elements: increasing the risk and reducing the rewards for traffickers. These two factors help mitigate the incentive for illegal wildlife trade as traffickers become more vulnerable to anti-poaching law enforcement and their merchandise becomes de-valued in the black market. Source, transport, and destination countries alike all need to collaborate in allocating resources effectively to spot signs of illegal wildlife trade.

There is both a grave reputational and legal risk to those who fail to comply with wildlife regulations at all stages of their supply chains. As more international policies come into action, regulatory agencies are scrutinizing organizations that fail to perform appropriate due diligence. For example, Turkish airlines was investigated last year for its lax enforcement of previously established wildlife trafficking policies. Not only did this hurt the airlines’ reputation, it became known as the ‘traffickers airline of choice.’ Meanwhile, companies assuring their supply chains do not include illegal wildlife create a ‘culture of compliance’ within their business, industry and nation.

Raising the risks and diminishing the rewards for wildlife traffickers requires a paradigm shift in public perception of environmental crimes. Wildlife trafficking tends to be viewed exclusively as an environmental crime, which financial institutions tend to perceive as low risk. However, like all forms of organized trafficking, it should be viewed on a holistic spectrum of financial crimes, alongside smuggling, money laundering, tax evasion, and fraud. All crimes directly related to wildlife trafficking, from killing endangered species in protected zones, to wiring illegal profits to an offshore bank account, need to be approached with a cohesive, risk-based ideology. Emphasizing the preservation of natural resources and enforcement of wildlife regulations will ultimately maintain more legal funds within the financial system that can benefit societal development.

Specific Species Trafficking Cases

Geographic Concentration of Elephant Trafficking, 2015 through 2020 YTD

Figure 5: Elephant ivory tusks are especially valuable in illicit wildlife trade. While most cases have been prosecuted closer to their natural habitats in India and Tanzania, there is also a high concentration of products that end up in the US.

Big Cat Trafficking, 2015 through 2020 YTD

Figure 6: ‘Big Cats’ include tigers, lions, leopards, panthers, pumas, jaguars and even rare crossbreeds such as the liger. Demand for tigers in the US has led to a higher rate of big cat trafficking in that jurisdiction than in India—their native habitat.