n 2021, U.S.–based Global Plywood and Lumber Trading LLC pled guilty to violating federal regulations and failing to exercise due care when importing timber from Peru. In fact, the timber had been illegally sourced from the Peruvian Amazon and legally exported to the United States. The company spent millions storing the shipment of wood, which was consequently destroyed at the company’s expense. But that’s not all, Global Plywood and Lumber Trading LLC was ordered to pay an additional $200,000 in restitution and a $5,000 fine. Following these losses, Global Plywood and Lumber Trading LLC voluntarily ceased import operations and dissolved. By purchasing criminally sourced timber, Global Plywood and Lumber Trading LLC inadvertently participated in trade–based money laundering (TBML) and the financing of illegal logging. While the U.S. company did not commit the environmental crime itself, they failed to conduct proper due diligence. Because of this inaction, the company’s timber purchase financed environmental crime in Peru. They were not the only company involved; four other U.S. companies were implicated in the same illicit timber shipment.
Too often, environmental crime—such as illegal logging, mining, or waste dumping—is viewed through the lens of ecological destruction, conservation, sustainability, and indigenous peoples’ rights. However, this case highlights how regulators are preventing criminally sourced natural resources from entering the United States. These incidents offer a stark warning to businesses operating in the natural resource sector: failure to conduct proper due diligence in supply chains can result in substantial legal and financial repercussions. To address environmental crime, it is crucial to shift lenses toward the economic mechanisms that enable and incentivize environmental crime in the first place.
Financing environmental crime
Trade–Based Money Laundering (TBML), a key financial mechanism behind environmental crime, is often under–reported. While traditionally linked to price manipulation through over– or under–invoicing, TBML schemes involving natural resources like timber and minerals are more complex. Criminals use trade transactions to launder illicit goods through legitimate supply chains, a process better understood as ”natural resource product laundering.” This form of laundering goes beyond price or value manipulation—it involves disguising the very products themselves. Once natural resources are processed—like logs sawed into lumber—it becomes difficult to determine their origins without the proper technology. This makes the natural resource extraction industry particularly vulnerable to these schemes.
Illegally sourced natural resource products that enter formal supply chains expose businesses to severe legal liabilities, reputational harm, and financial consequences. Global Plywood is a stark reminder. Despite using a third–party supplier, the company violated U.S. laws by failing to prevent illegally harvested timber from entering its supply chain and reaching U.S. markets. The challenge here is not just financial—it is about the integrity of the entire supply chain.
Addressing resource laundering
Addressing TBML and environmental crime requires a shift in perspective. These issues are not just ecological or conservation concerns, they are financial crimes with far–reaching consequences. The illegal extraction and trade of natural resources funds multi–level criminal operations, from local corruption to transnational organized crime. It threatens democracy, the rule of law, public security, and undermines private sector interests by creating instability and risk in global supply chains.
Private sector must pay attention. Companies cannot hide behind intermediaries. Governments and regulators are increasingly focused on supply chain transparency, especially in the natural resource sector across the Americas. As enforcement catches up, businesses operating in the region face the real possibility of product seizures, legal fines, and irreparable damage to their reputations. Companies must understand that their involvement, even inadvertently, in these illicit activities can result in direct financial losses and damage to their brand.
With growing regulation and scrutiny, businesses must proactively secure their supply chains to mitigate reputational risk and legal repercussions. By adopting stricter due diligence practices and ensuring that natural resources entering their supply chains are ethically sourced, businesses can help fight back and eliminate the profitability of these illegal activities. Investing in public–private partnerships to strengthen supply chain resilience and supporting transnational and local data transparency initiatives are essential for enhancing due diligence while empowering law enforcement and journalists to combat illicit activities.
The goal is to make it unprofitable to launder illegal natural resources, forcing complacent companies and criminals to abandon these practices.
Preventing environmental crime requires a coordinated response between the private sector, governments, and international regulators. Dismantling the financial structures that support these crimes can significantly change conservation efforts. If companies fail to act, they risk far more than financial losses—they risk losing their place in a marketplace increasingly demanding transparency, responsibility, and ethical conduct.
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The cost of ignorance: How companies unwittingly fund environmental crime
Photo by HS Spender from Unsplash.
October 18, 2024
Multinational enterprises in the Americas must recognize networks exploiting trade to launder proceeds from environmental crime and illegal natural resources. These networks threaten trade, cooperation, and resource supply chains, writes Zacarías Saderup.
I
n 2021, U.S.–based Global Plywood and Lumber Trading LLC pled guilty to violating federal regulations and failing to exercise due care when importing timber from Peru. In fact, the timber had been illegally sourced from the Peruvian Amazon and legally exported to the United States. The company spent millions storing the shipment of wood, which was consequently destroyed at the company’s expense. But that’s not all, Global Plywood and Lumber Trading LLC was ordered to pay an additional $200,000 in restitution and a $5,000 fine. Following these losses, Global Plywood and Lumber Trading LLC voluntarily ceased import operations and dissolved. By purchasing criminally sourced timber, Global Plywood and Lumber Trading LLC inadvertently participated in trade–based money laundering (TBML) and the financing of illegal logging. While the U.S. company did not commit the environmental crime itself, they failed to conduct proper due diligence. Because of this inaction, the company’s timber purchase financed environmental crime in Peru. They were not the only company involved; four other U.S. companies were implicated in the same illicit timber shipment.
Too often, environmental crime—such as illegal logging, mining, or waste dumping—is viewed through the lens of ecological destruction, conservation, sustainability, and indigenous peoples’ rights. However, this case highlights how regulators are preventing criminally sourced natural resources from entering the United States. These incidents offer a stark warning to businesses operating in the natural resource sector: failure to conduct proper due diligence in supply chains can result in substantial legal and financial repercussions. To address environmental crime, it is crucial to shift lenses toward the economic mechanisms that enable and incentivize environmental crime in the first place.
Financing environmental crime
Trade–Based Money Laundering (TBML), a key financial mechanism behind environmental crime, is often under–reported. While traditionally linked to price manipulation through over– or under–invoicing, TBML schemes involving natural resources like timber and minerals are more complex. Criminals use trade transactions to launder illicit goods through legitimate supply chains, a process better understood as ”natural resource product laundering.” This form of laundering goes beyond price or value manipulation—it involves disguising the very products themselves. Once natural resources are processed—like logs sawed into lumber—it becomes difficult to determine their origins without the proper technology. This makes the natural resource extraction industry particularly vulnerable to these schemes.
Illegally sourced natural resource products that enter formal supply chains expose businesses to severe legal liabilities, reputational harm, and financial consequences. Global Plywood is a stark reminder. Despite using a third–party supplier, the company violated U.S. laws by failing to prevent illegally harvested timber from entering its supply chain and reaching U.S. markets. The challenge here is not just financial—it is about the integrity of the entire supply chain.
Addressing resource laundering
Addressing TBML and environmental crime requires a shift in perspective. These issues are not just ecological or conservation concerns, they are financial crimes with far–reaching consequences. The illegal extraction and trade of natural resources funds multi–level criminal operations, from local corruption to transnational organized crime. It threatens democracy, the rule of law, public security, and undermines private sector interests by creating instability and risk in global supply chains.
Private sector must pay attention. Companies cannot hide behind intermediaries. Governments and regulators are increasingly focused on supply chain transparency, especially in the natural resource sector across the Americas. As enforcement catches up, businesses operating in the region face the real possibility of product seizures, legal fines, and irreparable damage to their reputations. Companies must understand that their involvement, even inadvertently, in these illicit activities can result in direct financial losses and damage to their brand.
With growing regulation and scrutiny, businesses must proactively secure their supply chains to mitigate reputational risk and legal repercussions. By adopting stricter due diligence practices and ensuring that natural resources entering their supply chains are ethically sourced, businesses can help fight back and eliminate the profitability of these illegal activities. Investing in public–private partnerships to strengthen supply chain resilience and supporting transnational and local data transparency initiatives are essential for enhancing due diligence while empowering law enforcement and journalists to combat illicit activities.
The goal is to make it unprofitable to launder illegal natural resources, forcing complacent companies and criminals to abandon these practices.
Preventing environmental crime requires a coordinated response between the private sector, governments, and international regulators. Dismantling the financial structures that support these crimes can significantly change conservation efforts. If companies fail to act, they risk far more than financial losses—they risk losing their place in a marketplace increasingly demanding transparency, responsibility, and ethical conduct.
