From Timber to Tungsten: How the Exploitation of Natural Resources Funds Rogue... (EventID=114220)
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On Thursday, November 4, 2021, at 10:00 a.m. (ET) National Security, International Development, and Monetary Policy Subcommittee Chairman Himes and Ranking Member Barr will host a hybrid hearing entitled, “From Timber to Tungsten: How the Exploitation of Natural Resources Funds Rogue Organizations and Regimes."
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Witnesses for this one-panel hearing will be:
• Kidan Araya, Member, Illicit Trafficking Working Group, Women of Color Advancing Peace and Security; Board Member, Africa Policy Accelerator, CSIS
• Carla García Zendejas, Director, People, Land, and Resources, Center for International Environmental Law (CIEL)
• Channing Mavrellis, Illicit Trade Director, Global Financial Integrity
• Kathleen Miles, Director of Analysis, Center on Illicit Networks and Organized Crime (CINTOC)
• Joshua Fruth, Chief Strategy Officer, Section 2 Financial Intelligence Solutions
Background
Natural resources are valuable economic drivers for government and national wealth. Legitimate, sustainably operated natural resource enterprises create jobs, generate revenue, and grow local and regional economies’ GDP. These commodities, however, also present lucrative opportunities for exploitation by bad actors such as criminals, kleptocrats, terrorists, and rogue regimes. Illicit activities involving unlawful or abused harvesting of resources like timber, gold, charcoal, oil, wildlife, minerals, and metals are estimated to generate between $110-$281 billion in proceeds every year and represent the fastest-growing transnational crimes. Beyond the harmful, long-lasting effects on local species and ecosystems, indigenous communities, and the global climate, these crimes and the funds that they generate pose serious threats to national security and global stability. Natural resource exploitation is a global concern but is often concentrated in biodiverse regions prone to violent conflict and political instability. Notable entities that have been known to engage in natural resource exploitation include Nicolas Maduro’s heavily sanctioned regime in Venezuela, the Lord’s Resistance Army in the Central African Republic, and the Mexico-based Sinaloa cartel. Many organizations that engage in natural resource exploitation have operations that cross national borders or continents, and are also engaged in corruption, extortion, and money laundering.
Methods of Natural Resource Exploitation
Like most transnational crimes, illicit natural resource extraction depends on vast networks of intermediaries, illegitimate business structures, illicit financial flows furthered by complex money laundering schemes, and combinations of formal and informal financial tools.
One common tactic used to shield illicitly sourced products is “comingling” where illegally obtained items like precious metals and timber are “hidden in the herd” by packaging and shipping them with legally sourced items throughout the supply chain, making it difficult for law enforcement and border officials to identify the illegal items as they move towards the end users.
Shell companies, front companies, and trust companies can be used to hide the ownership of those obtaining extraction licenses, opening trade finance accounts, or selling and shipping their exploited goods. Trade-based money laundering schemes11 are used to facilitate the movement and sales of illicit goods and to legitimize the proceeds that can then be routed through offshore bank accounts. These methods and supply chains within trafficking routes and networks of facilitators are generally the same or overlap regardless of whether they are used to transport people, extract natural resources, or move narcotics and illegally obtained goods like endangered wildlife.
The Role of Corruption
Terrorists, illicit networks, and rogue regimes thrive when governments are corrupt or susceptible to corruption. Corrupt actors in the private sector, including some lawyers, accountants, and other corporate and trust formation agents, also play a critical role in connecting terrorists to legitimate trade networks and likely enable criminal groups to evolve beyond resource extraction to partake in more complex, illicit finance endeavors. In the Democratic Republic of Congo (DRC), for example, high-ranking government officials traded mining contracts for funds that were laundered abroad, draining revenues that should have gone to the people of the DRC. These corrupt deals can have broader geopolitical significance, as seen in a recent deal to gain control of that country’s valuable cobalt reserves where China agreed to cancel $28 million in loan repayments...
Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408596