Finance & illegality

Finance & illegality

An important aspect of illegality in the forest sector relates to finance. This includes under-payment of taxes and fees, the use of bribes and the laundering of money from illegal activities. Financial institutions are also complicit in illegality if they lend money to companies that undertake illegal logging and illegal forest conversion.  

Improved transparency over payments that are made within the sector is one way to tackle these problems. The Extractive Industries Transparency Initiative (EITI) requires governments of member countries to disclose the revenues from the extraction of their natural resources, and a number of countries have decided to include the forest sector in their reporting, for example, Liberia (EITI, 2008). In 2013, legislation was introduced into Europe that requires forestry companies (and other extractive industries) to disclose certain payments made to governments (European Union, 2013).

Money laundering legislation provides another potential tool in those countries where illegal logging is considered a predicate offence. It allows for the seizure of profits from forest crimes as well as the prosecution of the criminals. Such an approach is not often pursued, due to lack of capacity, the fact that forest crimes are not prioritised, or an absence of cooperation between enforcement agencies in different jurisdictions. The World Bank has called for more effective use of these measures to target high-level corruption and large-scale crimes in the sector (World Bank, 2012).