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FinCrime Institute
Category: Predicate Offenses

Environmental Crime Proceeds

Also known as: Proceeds of Environmental Crime, Environmental Crime Profits
Simply put

Environmental crime proceeds are the money and assets generated by illegal activities that harm nature, natural resources, or human health, such as illegal wildlife trade or illegal logging. Because environmental crime is regarded as one of the most profitable criminal markets, these proceeds are frequently laundered to disguise their illicit origins. Criminals may move these funds and goods across borders to conceal where they came from.

Formal definition

Environmental crime proceeds refer to the financial gains and assets derived from environmental crimes, illegal activities that harm human health, nature, and natural resources by damaging the environment, which serve as predicate offences to money laundering. According to FATF, environmental crime is among the most profitable criminal enterprises, and the Egmont Group identifies associated typologies including illegal wildlife trade and illegal logging, among others, as generating proceeds that are subsequently laundered. The scope of what constitutes 'environmental crime' as a predicate offence varies by jurisdiction, and practitioners should confirm which specific offences are designated as predicate crimes under the applicable national legal framework. Financial intelligence units (FIUs) and obliged entities play a role in the prevention, detection, and deterrence of environmental crime and the laundering of its proceeds, though the tracing and identification of such proceeds may be complicated by cross-border movement of associated goods and funds.

Why it matters

Environmental crime is widely regarded by standard-setters and financial intelligence bodies as one of the most profitable criminal markets, generating substantial illicit gains each year. FATF estimates the sector produces criminal proceeds in the range of roughly USD 110 to 281 billion annually, though such figures are estimates and their exact scale is inherently difficult to measure. Because the profits are so large and the underlying activities, such as illegal wildlife trade and illegal logging, are geographically dispersed, the resulting proceeds create significant money laundering exposure that obliged entities may encounter even where they have no direct connection to the natural-resource sectors involved.

For compliance professionals, environmental crime proceeds matter because the underlying environmental offences can serve as predicate offences to money laundering. However, the scope of what constitutes an environmental crime as a predicate offence varies by jurisdiction, and not all environmental offences are designated as predicates everywhere. This means that the same conduct may generate launderable proceeds in one legal framework while being treated differently in another, and practitioners should confirm the designated predicate offences under the applicable national law rather than assuming a uniform global standard.

The cross-border movement of associated goods and funds compounds the challenge of tracing and identifying these proceeds. Because criminals may route funds and commodities through multiple jurisdictions to obscure their origin, detection often depends on cooperation between financial intelligence units (FIUs), obliged entities, and other authorities. This makes environmental crime proceeds a domain where risk-based measures can help detect and deter laundering, but where no single control eliminates the underlying risk.

Who it's relevant to

Financial Intelligence Units (FIUs)
FIUs play a role in the prevention, detection, and deterrence of environmental crime and the laundering of its proceeds. Their analytical and information-sharing functions are particularly important given the cross-border nature of associated goods and funds, which can complicate the tracing of proceeds across jurisdictions.
Obliged Entities and Compliance Officers
Banks and other obliged entities may encounter environmental crime proceeds within their customer base or transaction flows, even without direct exposure to natural-resource sectors. Compliance teams should confirm which environmental offences are designated as predicate offences under their applicable national framework and calibrate risk-based monitoring accordingly, recognising that an alert or report does not by itself establish wrongdoing.
Financial Intelligence Analysts and Investigators
Analysts and investigators tracing suspected environmental crime proceeds should account for the cross-border movement of both funds and associated goods, which can obscure the illicit origin of value. Typologies such as illegal wildlife trade and illegal logging offer starting points for analysis but should not be treated as exhaustive or as proof of criminality.
Legal and Risk Professionals
Because the definition of environmental crime as a predicate offence varies by jurisdiction, legal and risk professionals should assess exposure against the specific offences designated under the relevant national law rather than assuming a single global standard, and should confirm scale estimates and thresholds against the applicable regulations and source materials.

Inside Environmental Crime Proceeds

Predicate Environmental Offences
The underlying environmental crimes that generate the proceeds, which may include illegal logging, wildlife trafficking, illegal mining, illegal fishing, waste trafficking, and pollution-related offences. Whether these qualify as predicate offences for money laundering varies by jurisdiction and depends on how each regime defines the scope of predicate crimes; the FATF Recommendations encourage treating serious environmental crimes as predicates, but implementation differs across countries.
Proceeds Generated
The economic benefit derived from environmental crime, which may take the form of cash, revenue from the sale of illicitly sourced commodities (such as timber, minerals, or wildlife products), or subsequent assets acquired with such benefit. What legally constitutes 'proceeds' typically depends on the applicable confiscation and money laundering law, for example the definition of criminal property under the UK Proceeds of Crime Act or equivalent instruments elsewhere.
Laundering Methods
Techniques used to obscure the illicit origin of environmental crime proceeds, which may involve trade-based methods, misuse of the formal or informal financial system, use of shell or front companies, and commingling with legitimate commodity trade flows. These map conceptually to the placement, layering, and integration model, which is an analytical framework rather than a legal test.
Convergence with Other Crime Types
Environmental crime proceeds frequently intersect with other illicit activity such as corruption, tax evasion, fraud, and other forms of organised crime. This convergence can complicate attribution of proceeds to a single predicate offence and is relevant to how obliged entities assess risk.
Cross-Border and Supply Chain Dimension
Because commodities linked to environmental crime often move through international supply chains, the proceeds may traverse multiple jurisdictions with differing legal frameworks. This raises questions of jurisdictional scope, trade documentation integrity, and the point at which an obliged entity's obligations are engaged.
Relevance to Obliged Entities
The extent to which financial institutions and other obliged entities must consider environmental crime proceeds depends on the applicable AML regime, the entity's exposure to relevant sectors and geographies, and its risk assessment. Environmental crime is increasingly cited in typologies but the specific obligations flow from the entity's own regulatory framework rather than a single global rule.

Common questions

Answers to the questions practitioners most commonly ask about Environmental Crime Proceeds.

Is environmental crime just a regulatory or licensing matter rather than a money laundering concern?
No. While environmental offences such as illegal logging, illegal mining, wildlife trafficking, illegal fishing, and unlawful waste disposal often begin as regulatory or licensing breaches, they can generate substantial illicit proceeds that are laundered through the financial system. In many jurisdictions certain environmental offences are recognised as predicate offences for money laundering, and the FATF has highlighted environmental crime as a significant source of laundered funds. Whether a specific environmental offence qualifies as a predicate offence depends on how the relevant jurisdiction defines predicate crimes, so this should be confirmed against the applicable law.
Does an alert or filing relating to suspected environmental crime proceeds mean the customer has committed a crime?
No. A screening alert, a transaction monitoring hit, or the filing of a suspicious activity or transaction report reflects a suspicion or an indicator that warrants further review or reporting; it does not establish that any offence has occurred. The determination that an environmental crime or associated money laundering has been committed is a matter for competent authorities and, ultimately, the courts under the applicable criminal law. Compliance measures are designed to detect and report potential risk, not to adjudicate wrongdoing.
How can an obliged entity identify potential proceeds of environmental crime in the absence of an obvious predicate offence label?
Detection generally relies on combining customer and transactional risk indicators rather than a single definitive marker. Institutions typically consider factors such as exposure to high-risk sectors (for example timber, mining, waste, or wildlife-related trade), geographic exposure to regions associated with such activity, inconsistencies between declared business activity and financial flows, and use of complex or opaque ownership structures. These indicators are illustrative and not exhaustive, and their presence signals a need for further scrutiny rather than proof of criminality. The precise indicators an entity applies should be calibrated to its own risk assessment.
Should environmental crime risk be treated as a standalone risk category in an AML risk assessment?
Whether to treat it as a discrete category or fold it into broader predicate-offence and sector risk analysis is a risk-based judgement for each institution. Many firms with material exposure to relevant sectors or geographies find it useful to address environmental crime proceeds explicitly within their enterprise-wide risk assessment so that related controls, monitoring scenarios, and enhanced due diligence triggers can be tailored. Firms with limited exposure may address it within existing risk factors. The approach should be documented and justifiable in light of the entity's customer base, products, and jurisdictions.
What due diligence measures are typically applied to customers in sectors exposed to environmental crime?
Where a customer or transaction presents elevated risk of connection to environmental crime, institutions generally apply enhanced due diligence measures, which may include obtaining additional information on the source of funds and source of wealth, verifying the legitimacy and permits underlying the customer's activity where relevant, understanding beneficial ownership, and increasing the intensity of ongoing monitoring. The specific measures depend on the applicable regime and the entity's risk-based policies; enhanced due diligence obligations and their triggers vary between frameworks such as the EU AML regime, the US Bank Secrecy Act and FinCEN rules, and the UK Money Laundering Regulations, and should be confirmed against the relevant instrument.
How should suspected environmental crime proceeds be reported once identified?
Reporting follows the general suspicious activity or transaction reporting obligations of the relevant jurisdiction, which may require filing with the applicable financial intelligence unit or supervisory authority. Terminology and mechanics differ: a suspicious activity report (SAR) is used in some regimes such as the US and UK, while a suspicious transaction report (STR) is the term used in others. The filing should reflect the suspicion and supporting indicators without asserting that a crime has been proven. Entities should also consider any tipping-off restrictions and record-keeping requirements under the applicable rules, and confirm the correct channel, format, and timing against their local reporting regime.

Common misconceptions

Environmental crime is an environmental or regulatory matter, not a money laundering concern.
Where environmental offences qualify as predicate offences under an applicable AML regime, the proceeds can give rise to money laundering exposure for obliged entities. The FATF Recommendations encourage treating serious environmental crimes as predicates, though whether and how they are captured varies by jurisdiction and should be confirmed against the relevant national law.
Environmental crime proceeds are largely cash-based and stay outside the formal financial system.
Proceeds may be laundered through a range of methods, including trade-based techniques, shell or front companies, and commingling with legitimate commodity flows within the formal financial system. Treating this as a purely cash phenomenon can understate the exposure faced by financial institutions and other obliged entities.
Identifying a transaction linked to an environmentally sensitive sector proves that environmental crime proceeds are involved.
A connection to a high-risk sector, geography, or commodity is a risk indicator, not proof of criminality. Typologies and red flags are not exhaustive and do not establish wrongdoing; they inform risk assessment and may warrant further scrutiny or, where thresholds are met, a suspicious activity or transaction report under the applicable regime.

Best practices

Confirm whether relevant environmental offences are treated as predicate offences under the AML regime(s) applicable to your institution, since this varies by jurisdiction and determines the scope of your obligations.
Incorporate environmental crime typologies into your risk assessment, focusing on exposure to high-risk sectors, commodities, geographies, and supply chains, while treating red flags as indicators to be investigated rather than proof of criminality.
Apply risk-based customer due diligence and, where warranted, enhanced due diligence to customers and transactions connected to sectors with elevated environmental crime risk, and document the rationale for the risk rating applied.
Scrutinise trade documentation and commodity flows for signs of trade-based laundering, such as misdescription or commingling with legitimate goods, recognising that these controls mitigate rather than eliminate risk.
Account for the cross-border nature of these proceeds by considering how differing jurisdictional frameworks and convergence with other crime types (such as corruption or tax evasion) may affect attribution and reporting.
Where suspicion arises, escalate and consider filing a suspicious activity or transaction report in line with the specific requirements of the applicable regime, and confirm any thresholds or procedural details against the governing regulation.