Waste disposal and dirty money: the next money laundering frontier
Illicit waste disposal and the ‘dirty’ money it generates
are the next frontier for law enforcement agencies battling global financial
crime.
Waste trafficking is one of the environmental crimes with a
money laundering dimension listed in a report released last week by the
Financial Action Task Force. The other two are illegal forestry and mining.
According to the international agency, illicit waste
trafficking generates anywhere between €8 to €10 billion in criminal gains
every year.
“Anti-money laundering is often not part of the public
policy dialogue on environmental protection. Despite the significant proceeds
involved in many cases, jurisdictions are mostly addressing environmental crime
as a conservation issue rather than a serious financial crime,” FATF said.
The research suggests that financial flows from waste
trafficking may be transnational, regional or even domestic. The transnational
aspect normally involves the illegal export of containers filled with
hazardous, non-compliant waste, or waste that is misclassified as recycled
materials.
Shipments are often directed to developing or middle-income
countries but in some instances the waste may never leave the country and is
disposed of illegally on land and at sea, or simply stored illegally.
FATF said that criminal syndicates play “a significant role”
in waste trafficking in many advanced economies.
“This includes organized crime groups owning or operating
legitimate front companies in waste management, but which do not operate as
stated. Instead, they often use sub-standard disposal or storage processes.
These companies may engage in fraud to secure contracts for waste disposal and
then illegally dumping, resulting in illicit proceeds – while also costing the
government millions in clean-up costs,” the report said.
And like other crimes examined in the FATF study, proceeds
from waste trafficking are often comingled with gains from legal waste trade.
Disrupting these illicit money flows presents unique
challenges because unlike extracted materials from forestry or mining, waste
has negative value.
“This liability provides businesses with an incentive to
dispose of its waste as cheaply and easily as possible, whether legal or
illegal. This provides criminal groups with many potential customers and
opportunities,” the report said.
FATF noted that the problematic nature of dealing with waste
also provides little motivation for jurisdictions to tackle illegal activity.
“Some companies bearing a legitimate permit for handling
waste may import much larger amounts of waste than their permit allows and
either export it or simply dispose of it,” FATF said, adding that this method
was the most common in Europe, due to the lack of internal border controls.
Illegal methods of waste disposal as a cost saving measure
serve to increase the company’s profit margins.
Despite the unique challenges posed by the waste sector, the
FATF called on member states to “investigate and prosecute for money laundering
and related offences”.
In a case study from Italy, a transnational criminal group
was dismantled and people prosecuted for illicit waste trafficking, tax crimes,
money laundering and self-money laundering.
False invoices discovered by the Italian law-enforcement
agencies amounted to €57 million with proceeds of crime laundered by simulating
false trade transactions with other countries. Another laundering technique
used was to simulate sports sponsorship.
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