Carbon credits, environmental crime, frauds, anti-money laundering

As a result of monitoring global developments in risks and crime trends, the Basel AML Index added environmental crime as a new indicator in the category “Quality of AML/CFT framework”, anti-money laundering and counter-terrorist financing (AML/CTF).

The Basel AML Index is an independent ranking produced by the Basel Institute on Governance since 2012. It provides holistic money laundering and terrorist financing risk scores based on data from 18 publicly available sources such as the Financial Action Task Force (FATF), Transparency International, the World Bank and the World Economic Forum (please note that ther is no relation with the "Basel Committee on Banking Supervision").

Examples of environmental crimes in this Basel AML Index report are forestry crimes, illegal mining, illegal wildlife trade and waste trafficking. Carbon credits are not specifically mentioned.

On the other hand, an UN Environment Program (UNEP) report from 2016 report about environmental crimes had already brought a few references to frauds related to carbon credits, in particular VAT related. The report "The rise of environmental crime: A growing threat to natural resources peace, development and security" indicated then that the growth rate of environmental crimes was astonishing and skyrocketed to become the world’s fourth largest crime sector (after drug & human trafficking and counterfeiting) in just a few decades, growing at 2-3 times the pace of the global economy. INTERPOL and UNEP estimated that natural resources worth as much as USD 91 billion to USD 258 billion annually were being stolen by criminals, depriving countries of future revenues and development opportunities.

Also earlier in 2022, Transparency International updated a 2011 report alerting about certain risks related to carbon capture and storage (CCS) and solar radiation management, also known as geoengineering. As these as solutions are increasingly being considered in fighting climate crisis, Transparency International brings attention to the following climate-related risks:

• (new) concentration of knowledge / power, creating potential conditions for corruptive lobbying or influence buying practices

• (new) patent and technology concentration, increasing the risk of rigging public procurement

• misappropriation of funds

• bribery in the awarding of contracts

• nepotism

• distortion of scientific facts

• breach of principles of fair representation

• false claims about the green credentials of consumer products (i.e. greenwashing)

Click here to recall this post from June and download the report.

And these two as well:

- from August 2021, "Money Laundering from Environmental Crime (FATF/GAFI)"

- from May 2021, a video "What does the climate crisis have to do with corruption? (Transparency International)"

Back and concluding, according to Basel AML Index press release, AML/CFT is about more than just fighting financial crime. It’s about protecting people, the environment and solutions such as the carbon credit markets and technologies such as carbon capture & storage, CCS.

Click on the image (from the cover of the UNEP 2016 report quoted above) below to access the Basel AML Index report and see the assessment for most countries.