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Illegal Logging in Latin American/the Caribbean and Challenger Banks vs. Traditional Banks

April 21-27, 2022 | Issue 5 - Illicit Finance and Economic Threats (IFET) Team

Jennifer Kelly, IFET Team

Justin Maurina, Editor; Jennifer Loy, Chief of Staff



Forest in Brazil[1]



Date: April 21, 2022

Location: Latin America and the Caribbean

Parties involved: Arcadia LAC, a group of 12 Latin American and Caribbean countries’ law enforcement; Interpol; Organized crime groups; Illegal loggers

The event: Arcadia LAC, a recent Interpol-coordinated operation, seized more than 1,200 cubic meters of timber illegally taken from forests in the region. The wood’s value is over $700,000 USD, with law enforcement responding to 287 reports and arresting 69 individuals during the month-long operation. The global illegal timber industry’s estimated worth is over $152 billion USD annually, while the Latin American and Caribbean regions are home to 25% of the world's tropical forests. High demand for timber worldwide has encouraged organized crime groups’ involvement in illegal logging.[2]

Analysis & Implications:

  • Latin American and Caribbean governments are almost certainly losing out on taxable profits from illegal logging. If more revenue returned to these societies via taxes, governments would very likely support poorer communities by providing greater job opportunities to prevent impoverished individuals from joining the illegal timber industry. Offering more stable jobs would likely lower emigration and almost certainly positively impact the economies.

  • The illegal timber industry almost certainly endangers Indigenous tribes living in Latin American forests such as the Amazon. Deforestation very likely forces tribes to relocate homes which likely inflicts great stress and economic pressure. Some Indigenous tribes very likely have minimal interaction with society, meaning controlled viruses, such as measles, transmitted from illegal loggers would likely have fatal consequences. Indigenous individuals are very unlikely to have the financial resources to obtain necessary medical aid to save their tribes, likely resulting in fatalities.


Date: April 26, 2022

Location: Global

Parties involved: Financial Conduct Authority (FCA); Challenger banks; Challenger banks’ customers; European Banking Authority; European Central Bank; Financial Action Task Force; Organized criminal groups

The event: The FCA stated that challenger banks, newer banks directly competing with traditional banks via modern financial technology such as online platforms, are not combating money-laundering enough. The FCA identified weaknesses in customer due diligence, as most banks reviewed failed to collect details about customers’ occupations and incomes. Some banks also had insufficient customer risk assessment frameworks. Organized crime groups may be drawn to challenger banks due to their fast onboarding process. The FCA requested challenger banks to review the findings and make necessary improvements to mitigate the money-laundering risks.[3]

Analysis & Implications:

  • The FCA’s review will likely encourage challenger banks to implement better anti-money laundering controls involving investigations into clients’ backgrounds and finances and internal audits to monitor transactions. By identifying money-laundering activities through challenger banks, authorities will likely collaborate with other countries to track illicit financial flows internationally and disrupt sophisticated organized criminal organizations. More thorough background checks will likely discourage organized criminal groups from using challenger banks due to increased risk of detection from law enforcement. Organized criminal groups will likely move their operations to other countries and financial institutions with weaker anti-money laundering controls, such as the Cayman Islands.

  • Regulatory authorities such as the European Banking Authority will likely investigate challenger banks in their regions to ensure compliance with regulations. Failure to comply with anti-money laundering rules will very likely lead to financial sanctions from entities such as the European Central Bank and the Financial Action Task Force. Fiscal penalties for challenger banks will very likely deter potential customers from opening legitimate accounts, likely leading to a loss in profits for the bank. A continuous loss in profits will likely lead to the bank dismissing staff or closing operations.

________________________________________________________________________ The Counterterrorism Group (CTG)

[1]Waterfalls on Cliff” by Renan Bomtempo licensed under Pexels

[2] Illegal logging in Latin America and Caribbean inflicting irreversible damage, Interpol, April 2022, https://www.interpol.int/en/News-and-Events/News/2022/Illegal-logging-in-Latin-America-and-Caribbean-inflicting-irreversible-damage-INTERPOL

[3] Challenger Banks Must do More to Tackle Money Laundering, Says FCA, Digit News, April 2022, https://www.digit.fyi/challenger-banks-must-do-more-to-tackle-money-laundering-says-fca/

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