Financial crime is not a closed ecosystem that affects corporate structures or individual victims in isolation. It has extended and expansive consequences for environmental, social and governance (ESG) issues world-wide.
The link between climate change and some financial
crimes is self-evident. Unlawful logging is underpinned by a profit
motive and a financial crime at heart. It contributes to deforestation,
which is the removal of carbon sequesters which regulate climate change
and habitat loss. Illegal wildlife trade in animals and plants, also
driven by financial gain, disrupts the balance of fragile ecosystems. It
endangers species, sending predator and prey harmony out of alignment
and disrupting migratory patterns. Unregulated mining requires illegal forest clearing and leaches harmful toxins into the surrounding earth and water supplies.
Environmental crimes, however, affect the ‘S’ as much as the ‘E’.
Pollution, wildlife degradation, biodiversity reduction and ecosystem
disruption threaten global food security and governmental capacity to
collect legitimate tax revenue, engender infectious diseases,
chemical poisoning, food contamination, mass displacement and damage
from natural disasters caused by climate change. For instance,
unfettered land clearing causes landslides and removes buffer zones
which protect coastal communities from cyclones and flooding.
What’s more, these crimes necessarily coalesce with others. Fraud,
corruption and bribery often facilitate and conceal environmental
violations, which are underscored by forced or exploitative labour
conditions. Trafficked or debt-bonded individuals are forced to
undertake illicit deforestation and mining which have a tangible effect
on climate change (40 per cent of deforestation is carried out by enslaved workers and modern slavery is thought to be the third highest carbon emitter globally).
Regional violence and human rights abuses associated with palm oil deforestation and conflict mineral mining are well documented. A number of terrorist groups
rely heavily on illegal charcoal and logging as primary sources of
finance and the displacement of traditional landowners by illegal
deforestation may, in turn, facilitate the recruitment of vulnerable members to such organisations, threatening global security.
Drug cartels increasingly complement their trade with lucrative
illicit goods like gold or wildlife which can be smuggled along the same
routes, with drugs and weapons concealed within hollowed out timber or live snakes. The Italian mafia
has profited from burning illegal waste, releasing toxic dioxins which
poisoned livestock, causing Campania’s dairy industry to collapse and
driving the region’s cancer mortalities up to 80 per cent higher than
the national average. Even in the UK, illegal waste costs the public up
to £200,000 per site.
Financial crime is also cyclical and self-perpetuating. When it robs
governments of taxes and citizens of legitimate employment and income,
exacerbating poverty, it creates an endless and reinforcing cycle of
exploitation, where people (and victims themselves) are forced to turn
to crime to sustain themselves. The same is true of environmental crime,
which threatens the livelihoods of those reliant on forests or the land
for legitimate sources of income or resources like medicine, fuel and
sustenance.
The net positive impact of taking ESG issues seriously and really
considering them not just as a compliance-driven or tick-boxing exercise
– both as companies and consumers – cannot be underestimated, for the
present and future of the earth and its citizens.
UK Finance
© UK Finance
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