On November 18, 2021, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice to draw attention to the growing proliferation of environmental crimes1 and the related illicit financial activity associated with them, and requiring that financial institutions must comply with specific suspicious activity report (SAR) filing instructions related to environmental crimes.2
Background on Environmental Crimes
Environmental crimes are those involving illegal activities that harm human health, nature, and natural resources by damaging environmental quality, including increasing carbon dioxide levels in the atmosphere, driving biodiversity loss, and causing the overexploitation of natural resources. Examples of common environmental crimes cited by FinCEN include:
- Wildlife Tracking. The illicit trade of protected animals, animal parts, and derivatives.
- Illegal Logging. The harvesting, processing, transporting, buying and selling of timber in violation of national and international laws.
- Illegal Fishing. Fishing activities conducted in contravention of applicable laws and regulations at the local, regional, and international levels.
- Illegal Mining. The illegal extraction of various metals, stones, and materials, including gold, silver, iron, coal, diamonds, emeralds, and rare earths, including by failing to secure legal permits, land rights, licenses, and environmental safeguards.
- Waste Trafficking. The intentional disposal of various kinds of waste, including, electronics, plastic, and industrial byproducts and runoff in a manner inconsistent with waste disposal laws.
Environmental crimes currently rank as the third largest illicit activity in the world, behind only drug trafficking and counterfeit goods. FinCEN notes that environmental crimes are estimated to generate hundreds of billions in illicit global proceeds annually, and these proceeds are only growing.
SARS Filing Instructions
Given the recent proliferation of environmental crimes and the susceptibility of the banking industry to be complicit, FinCEN noted that SAR filings and other Bank Secrecy Act compliance requirements are crucial to identifying and stopping environmental crimes and related money laundering. To that end, FinCEN offered the following guidance:
- Financial institutions should only reference this Environmental Crimes notice in SAR field 2 using the keyword “FIN-2021-NTC4.” The same keyword should also be referenced in the narrative portion of the SAR.
- Financial institutions should also use SAR field 38(z) (Other Suspicious Activities – other) to denote a connection between the suspicious activity being reported and environmental crimes.
- Financial institutions should use the most relevant keyword for describing the suspicious activity such as “wildlife trafficking” or “illegal mining.”
- Where the suspicious activity involves multiple potential offences, FinCEN instructs that the filers include all relevant keywords in the narrative.
- For the narrative section FinCEN requires that:
- Filers detail how the suspicious activity relates to environmental crimes.
- Filers provide all details concerning how illicit products were solicited, acquired, stored, transported, financed, and paid for.
- Filers provide details including access to names, contact information (including Internet Protocol), email addresses, and phone numbers related to:
- Any actual purchasers or sellers of the illicit product and their agents;
- The volume and dollar amount of the transactions involving entities that are or may be operating as suppliers of illicit products; and
- Any beneficial owners of any involved entities.
Importance of Addressing Environmental Crimes
FinCEN identified three reasons for its decision to focus on environmental crimes and their resulting illicit financial activity. First, environmental crimes have a strong association with corruption and transnational criminal organizations, which were recently identified by FinCEN as national anti-money laundering and countering the financing of terrorism priorities.3 Second, FinCEN recognized that there was a need to enhance reporting and analysis of related illicit financial flows. Lastly, FinCEN recognized that environmental crimes contribute to the climate crisis by threatening ecosystems, decreasing biodiversity, and increasing carbon dioxide in the atmosphere.
If you have any questions about the applicability of or compliance with these new SAR filing requirements, please reach out to your Seward & Kissel contact attorney.