Illegal Wildlife Trade and the Banking Sector in China

• TRAFFIC calls on Chinese banks to take steps to ensure that their networks cannot be used for money laundering
• Provides guidance to institutional investors on necessary governance and stewardship to drive best practice in the banking sector

The illegal trade of wildlife exploits not only species at grave risk, but also threatens ecosystems and contributes significantly to biodiversity loss. The illicit trade can erode the foundations of economies and livelihoods.

Banks in China have a major role to play in curtailing these crimes. By taking a zero-tolerance approach to the illegal wildlife trade, they can work to prevent the proceeds of these crimes from being laundered through their networks.”  

Nick Ahlers, Africa Programme Director

The Chinese government and international authorities are strengthening their efforts to combat money laundering and corruption in general and the illegal wildlife trade in particular. Taking action is increasingly seen as an integral part of the regulatory obligations on banks and of banks’ wider corporate responsibilities.

Nick Ahlers added: “By acting on illegal wildlife trade, banks can mitigate a range of financial risks, and improve their reputation among law enforcement agencies, regulators, clients, peers, and consumers. These guides will help banks to do their part.”

According to the Intergovernmental Panel on Biodiversity and Ecosystem Services, one million species are at risk of extinction and the second most significant driver of biodiversity loss is ‘direct exploitation’ which is sometimes driven by trade. The illegal wildlife trade is a major transnational organised crime that generates between US$7 billion and US$23 billion each year, placing it alongside the illegal trafficking of narcotics, arms, and humans in size and scale. Illegal wildlife trade cannot occur at this scale without financial crime and corruption. Given that the Chinese banking sector is the largest in the world and given the scale of the illegal wildlife trade in Asia, Chinese banks have a key role to play.

TRAFFIC, together with report authors, Chronos Sustainability, say it is imperative that Chinese banks ensure their networks are not being used for money-laundering purposes. To achieve this, the banks must adopt strong zero-tolerance positions on the illegal wildlife trade and encourage their clients and business partners to follow suit. They should also support law enforcement by providing data and information on suspicious transactions.

The newly published guidance recommends banks take action in five ways:

• Make a formal, public commitment to zero tolerance of the illegal wildlife trade that applies to the bank itself and its subsidiaries, as well as all individuals and organisations with which it has a business relationship, including clients and suppliers.
• Establish the systems and processes necessary to deliver these zero-tolerance commitments, such as increasing board and executive oversight, providing staff training and adopting clear procedures and processes to monitor exposure to the illegal wildlife trade.
• Ensure that their Know Your Customer and Know Your Business processes pay attention to the potential for customers and businesses to be involved in the illegal wildlife trade.
• Report publicly on a regular basis how they have implemented their zero-tolerance commitments.
• Collaborate with other banks and with other stakeholders to build capacity and understanding of the illegal wildlife trade within the banking and finance sectors.

In addition to the guidance for banks, a Briefing for Institutional Investors has been published, as TRAFFIC believes investors can play a significant role in helping to ensure that banks combat the illegal wildlife trade. As equity investors and providers of debt to Chinese banks, institutional investors have a clear interest in encouraging banking institutions to take steps to improve practices and ensuring that these commitments are fully integrated into these banks’ operating systems and processes.

Dr Rory Sullivan, CEO of Chronos Sustainability, said: “As the financial system becomes ever more globalised, banks should expect increasing pressure from investors to put measures in place to stamp out money laundering by the illegal wildlife trade. Institutional investors are increasingly investing in a sustainable and responsible fashion, and as a result are placing greater pressure on companies to change their behaviour and improve their operations.

With the Chinese government cracking down on corruption and regulators and investors alike scrutinising corporate activity for unethical behaviour, banks are well-advised to integrate commitments to zero tolerance of the illegal wildlife trade into their systems and processes for managing anti-money laundering and corruption, and into their corporate social responsibility strategies.”