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including financial institutions, transport companies, traders and wholesale retailers
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The aim is to broaden understanding of the threats that wildlife crimes pose to sustainable development and
clean business. It provides relevant information, statistics and background
knowledge to help enhance policies and processes aimed at curbing wildlife crime and associated risks. The
focus is on financial crimes and supply chain vulnerabilities that facilitate the illegal trade in wildlife
and thereby increase companies’ legal, financial and reputational risks.
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Citation: Basel Institute on Governance, 2021. Wildlife crime – understanding risks, avenues for action.
Part
3: Forest crime and the illegal timber trade. Basel: Basel Institute on Governance, https://baselgovernance.org/publications/wildlife-crime-series
Timber
trafficking is a major
form of wildlife and forest crime, defined by UNODC as “the taking, trading (supplying, selling or
trafficking), importing, exporting, processing, possessing, obtaining and
consumption of wild fauna and flora, including timber and other forest
products, in contravention of national or international law”.
As much as 30percentof the global timber harvest is illegal, valued at up to USD 150 billionper year.
In parts of the Amazon, Central Africa
and Southeast Asia with large tropical forests, illegal logging is estimated to account for
50 to 90 percent of all forestry activities.
Rosewood is estimated to be the highest value and highest volume of illegally traded wildlife
product globally.
Impacts of timber trafficking include deforestation, desertification and other forms of
environmental degradation; biodiversity loss; habitat destruction; loss of government revenues; and
reduced economic opportunities for local communities. Timber trafficking can fund armed groups.
Illegal activity is present throughout the timber supply chain and includes corruption, tax
evasion, non-payment of fees, document fraud and money laundering.
If processing occurs at the point of origin, it becomes nearly impossible to determine the
legality of timber products. Illegal products that enter the supply chain at this stage are
then transported as part of legal shipments.
Timber trafficking requires the involvement of corrupt officials and unscrupulous companies to
launder illegally sourced wood into the international supply chain.
2. Introduction to corruption and timber trafficking
Illegal
logging and the trade in illegally sourced timber is a major illicit industry
with supply chains stretching across the world. Its prevalence is due to a
range of criminal behaviours in violation of local, national and international
laws that, for various reasons, go undetected or unpunished.
Corruption
is a primary facilitator of the illegal trade in timber. The global cost of
corruption in the sector is at least USD 29 billion per year, according to INTERPOL (2016). Bribery, fraud,
abuse of office,
extortion, cronyism and nepotism are common in the forestry sector and involve
government officials, law enforcement officers and logging company officials (INTERPOL, 2019).
As in
animal trafficking, the legal and illegal timber trades are deeply intertwined
(UNODC, 2012). Timber trafficking typically involves
criminals working in legitimate forestry businesses, corrupt officials and
government agencies who work together to launder illicit timber products into legal
markets. Criminal groups are attracted to timber
trafficking due to the high value of timber and the low risk of penalties.
Illegal logging and
timber trafficking often occur in countries with poor governance, weak law
enforcement and high levels of corruption (Baker, 2020), as well as in
conflict and post-conflict areas, especially where large tropical rainforests
remain. The forestry sector is poorly regulated or monitored in much of the
world, even where strong policies and laws exist on paper. This enables large-scale
illicit trade to occur.
Globally, as much as 30 percent of the timber harvest is illegal.
According to INTERPOL, the illegal trade
in timber is valued at up to USD 152 billion per year. In parts of the Amazon, Central Africa and
Southeast Asia with large tropical forests, 50 to 90 percent of logging
activity is illegal (see box, source: Congressional Research Service, 2019).
Box 1: Illegal logging in selected countries
Country of origin
Estimated % of illegal logging
Brazil
50%
Cameroon
50-65%
Democratic Republic of the Congo
90%
Ghana
34-70%
Indonesia
60-80%
Laos
35-80%
Malaysia
35%
Increasing
consumer demand for timber products, particularly rare hardwoods, is driving
unsustainable
over-exploitation of forests globally (UNODC, 2020). Demand is greatest in Asian
countries producing tropical hardwood furniture for consumers in the U.S.,
Europe and Japan.
Rosewood, a
term that covers a range of tropical hardwoods, is estimated to be one of the highest
value and highest volume of illegally traded wildlife product globally.
Timber
trafficking has numerous detrimental effects on sustainable and equitable
development, including the following (Dawson,
2020; UNODC, 2012; WWF, n.d.):
contributes to deforestation, desertification and other forms of environmental
degradation;
reduces biodiversity with the potential for species extinction;
robs communities of the opportunity to harvest renewable forest resources and
achieve sustainable livelihoods;
deprives governments of billions in fees, taxes and customs revenues;
often overlaps with other illegal activities involving drug trafficking, cattle rustling, wildlife
trafficking, human rights abuses and serious corruption;
fuels conflicts in areas where armed groups engage in timber trafficking and the
taxation of the movement of illegal timber harvests, such as in Myanmar and
Senegal;
As much
as 200 tonnes of CITES Appendix II protected red sanders (also known as red
sandalwood) are seized from India’s illegal timber trade each year. Red sanders
are trafficked to meet high demand for sandalwood carvings, furniture and
musical instruments, as well as medicine and cosmetics in China and the Gulf
States.
The trade is immensely lucrative: one tonne of ‘A
grade’ quality red sander logs are estimated to sell wholesale at USD
130,000–200,000, while lower ‘B grade’ red sanders can fetch USD 35,000-65,000
per tonne. In destination markets, red sanders furniture may be
sold for prices ranging from USD 13,000 for small chairs to millions of dollars
for ornately carved pieces.
All
international trade in red sanders is restricted, and the production and sale
of products made from these species introduces significant risk for financial
institutions and other private companies. According to media reports, only a
tenth of smuggled red sanders are estimated to be seized. Seizures are
reportedly often released upon payment of bribes.
The lucrative nature of the trade
attracts
organised crime groups, corrupt officials and others: politicians,
mid-level police, customs officials, and actors in the Tamil film industry
have all been arrested for involvement in red sanders smuggling. Corruption
typically
includes:
Forestry officials bribed to allow poachers access to protected areas.
Police at road checkpoints bribed to allow movement of logs.
Customs and port officials paid to provide falsified documents and intentionally limit physical checks of suspect containers.
In May 2020,
authorities in India seized 1.5 tonnes of
red sanders alongside USD 1.3 million worth of methamphetamine, opium paste,
heroin, MDMA (ecstasy), amphetamine and methaqualone. This illustrates
convergence with drug trafficking networks. Red sanders smuggling routes also
converge with cigarette smuggling routes to the UAE and wildlife trafficking
routes from India to Asia.
Note: The above details are contained in a
United for Wildlife Taskforce Alert (AL-00021) circulated to Taskforce members
in October 2020, summarising current knowledge and trends on red sandalwood
trafficking. Used with permission from the author.
Despite its
scale and seriousness, timber trafficking remains a low priority issue for most
countries. Not enough appears to have changed since UNODC (2012) noted that:
…“underdeveloped legal frameworks, weak law enforcement and poor
prosecutorial and judicial practices, as well as a lack of
understanding of the different factors that drive wildlife and
forest offences, have resulted in valuable wildlife and plant
resources becoming threatened by, inter alia, illegal logging,
illegal trade in timber products… The gaps in domestic and
international control regimes, difficulties in identifying illegal
commodities and secondary products, along with intricate trafficking
routes, have resulted in the inability to effectively curtail the
trade."
While awareness of the risks of timber trafficking is
increasing, political will and capacity to address the problem are
lacking. Australia, the EU and the U.S. ban the import of illegally
harvested timber and wood products, but the effect of this ban is
nullified by the countries that do not ban illegal timber, such as
some Asian countries.
One method for private firms to ensure the legality of timber supply
chains are certification programmes. These place the onus on the
industry to
sustainable manage concessions and voluntarily submit to inspections
along the
supply chain to ensure only legal, sustainably harvested wood enters the
global
supply chain.
According to the Food and Agriculture Organization (FAO),
there are
more than 50 certification schemes globally, responsible for overseeing
compliance
with timber trade regulations in areas with weak forestry controls.
Well-known
schemes include:
Many schemes work with
local communities, governments and companies through a multi-stakeholder /
Collective Action approach to secure the supply chain.
While the schemes represent an important tool in forest management and
are considered generally effective, they remain vulnerable to
weaknesses. These
include the
susceptibility of officials to bribes and payoffs to permit illegal
logging,
complicity in the clearcutting of rainforests, intimidation of local
communities, and threats and violence against forest activists, forestry
officers and park rangers.
Even well-known manufacturers may be caught up in timber trafficking
through
failures in the certification process, including bribery and corruption
risks.
Examples include an investigation
by the NGO
Earthsight into IKEA furniture, with some commentators
questioning whether forest
certification actually works (Dasgupta,
2017). Even
well-known and established manufacturers of musical instruments and
other wood
products may have unknowingly used illegally sourced timber in their
products,
due to the complexity of supply chains and lack of real traceability.
3. Legal and illegal timber supply chains
A range of
illegal activities are associated with timber trafficking at all points along
the supply chain, including (UNODC, 2012):
Corruption
Tax evasion
Non-payment of fees
Document fraud
Money laundering
The
following infographic gives a simplified overview of illegal activities in the
timber trafficking supply chain and how easy it is for illegal timber to be
mingled with legally felled timber and exported to international markets.
The following infographic
gives a simplified overview of how the legal and illegal supply chains of timber products can intertwine:
The following section describes the illegality and
intermingling of supply chains in more detail.
4. From forest to store
Illegal
activities at the source include:
logging of protected species;
logging in protected or prohibited areas;
exceeding quotas;
permit fraud;
logging without permits;
logging with illegally acquired permits;
tax and other fee avoidance;
destructive harvest practices;
more extensive logging than needed for infrastructure projects such as roads;
obtaining logging permits and concessions with documents available on the black market, such as forestry management plans, yield estimations, etc.
When
processing occurs at the point of origin it makes tracing the origins of the
wood difficult, increasing the risk of mixing legal and illegal timber.
Timber
trafficking networks are often highly segmented, with individuals working at
one level unlikely to have a detailed understanding of other parts of the
network. In some instances, agents operating from urban areas recruit poachers
to illegally fell trees, arranging for transport, food and accommodation.
Most timber
trafficking appears to be done to order, with illegal cutters earning a set fee
per kilogram or tonne of wood cut. In developing countries like Myanmar,
illegal logging is so rampant it can be considered a cottage industry, with
illegal tree felling occurring opportunistically over widespread areas.
Where large
timber companies are present, illegal activity takes place in the shadow of the
legal enterprise. Companies regularly:
log outside of protected areas;
exceed quotas;
take protected trees;
purchase timber from local poachers;
engage in a range of document fraud to facilitate the export of legal and illegal wood
within the same shipment.
Laundering
illegally logged wood into the legal international trading system is a process
that exploits systemic weaknesses at the state level. Indeed, corrupt forestry
practices are often embedded in political institutions, such as is alleged to
be the case in Indonesia (Schütte, 2020). Such states sometimes engage the
support of parastatal organisations and affiliates to launder trees.
The process
earns politically exposed persons and other high-level officials millions of
dollars, lines the pockets of lower-level corrupt officials, and supports large
and small criminal enterprises throughout the supply chain.
In the Gambia, which earns about 10
percent of its GDP through timber trafficking, former Gambian President Yahya
Jammeh is accused of having trafficked rosewood through a
company he co-founded, Westwood Gambia Limited.
Westwood was granted exclusive
timber export rights that allowed it to collect fees from timber traffickers to
facilitate illegal exports. According to an Environmental Investigation Agency
report (2020a),
corruption within the Ministry of
Environment, Climate Change and Natural Resources and the Department of Parks
and Wildlife Management (the CITES Management Authority) ensured traffickers
working through the company received the documents and permits required for
export.
This allowed Westwood and timber
traffickers working through them to sell at least USD 163 million worth of
rosewood to China from 2014 to 2017. Despite efforts at reform, NGOs claim that the
model has continued unimpeded under the name of a new company.
From 2017–2020, the Gambia exported
nearly 330 tons of rosewood to China illegally logged in Senegal’s Casamance
region, despite multiple national and regional export bans
During the transit phase, illegality includes (UNODC, 2012):
misclassification of exports;
excessive exports;
mis-declaration of species, values and volumes;
mixing illegal timber into legal shipments;
clandestine export;
export without permits;
illegally obtaining export permits;
illegal export of protected species;
export with fraudulent documents;
transport, processing and sales of goods made from trafficked timber.
Once cut, upstream logistics agents arrange for the movement of
wood
from stockpiles typically hidden near the poaching source to warehouses closer
to port facilities, bribing officials as needed.
Downstream agents, often operating through legitimate
trading companies,
facilitate movement through ports. They do this by, for example:
paying container stuffers to obfuscate contraband within sealed and pre-checked containers;
hiring drivers to move containers to port;
helping arrange and/or falsify necessary paperwork and licences for export.
Traffickers often prefer to export and import
protected wood species through zones with weak or no protections. When species
protections are uneven across neighbouring jurisdictions, the risk of illegal
activity within the supply chain increases.
For example, traffickers are known to move large amounts of illegally logged teak from
Myanmar to China via overland routes. According to Myanmar law, all timber exports
must transit through the port in Yangon. All overland trade is prohibited. However, large
seizures in the hundreds of tonnes across the border in China indicate the presence of
sophisticated cross-border trafficking networks and corrupt officials.
Similarly, despite Senegal
prohibiting the felling or export of rosewood, most of the Gambia’s rosewood
exports are made up of trees illegally cut in Senegal’s Casamance region. Rosewood
is consolidated along the border with Senegal, then rough-hewn into squared-off
logs, loaded onto trucks and transported to Banjul for onward export to Asia.
At import,
illegal activities include:
illegal import
of protected species;
import ban
violations;
undeclared
imports;
false,
fraudulent, or incomplete documentation;
false
declarations;
obfuscating the origin of the wood by labelling it with an imprecise
geographical region such as “harvested in Europe/Asia”;
creating fraudulent timber certifications visually designed to look
similar to legitimate ones;
labelling products with inaccurate and misleading phrases such as
“ethically harvested” or “made from sustainable wood”;
importing timber to third countries and then re-exporting to destinations
to profit from free trade agreements or less stringent regulations;
imports exceed
set limits.
Many of
these activities are described in more detail in UNODC (2012).
Unscrupulous companies and corrupt officials regularly engage to
facilitate the import and onward sale of trafficked timber.
Companies
go to great lengths to circumvent local, national, and international
regulations to launder wood into legal supply chains by taking advantage of a lack
of enforcement and loopholes in legislation.
To avoid the EU Timber Regulation
(EUTR), which requires importing companies to conduct due diligence to ensure
legality in the supply chain, European companies may import illegally harvested
timber from Myanmar through companies in low enforcement zones in Croatia,
Italy and Greece.
Because only the importing company
needs to demonstrate due diligence, once timber is successfully imported,
companies can purchase it with no further requirement to illustrate due
diligence. Unscrupulous companies search for countries with weaker enforcement
of EUTR standards in order to game the system and avoid serious scrutiny of
timber efforts.
According to an investigation by the
Environmental Investigation Agency
(2020b) from 2017–2019 approximately 144 tons of Myanmar teak
was illegally imported into the EU in 10 separate shipments valued at over USD
1 million. Once illegally imported, the timber was sold to companies operating
in Western Europe, some of which have been involved in past violations of the EUTR.
A free introductory online training programme (two hours) on how to identify and mitigate financial risks related to IWT. Co-developed by ACAMS (the largest international membership organisation for anti-financial crime professionals) and WWF with Basel Institute on Governance support.
Go to course .
3. ECOFEL Wildlife Crime eLearning course
An introductory course to wildlife crime designed for Financial Intelligence Unit staff, law enforcement and supervisory authorities. Go to course
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