Fighting illegal loggers

Fighting illegal loggers

The Indonesian government mounted a fight on forest crimes by making it extremely difficult for businesses and individuals to launder money amassed from illegal logging through the financial system, notably banks.

This move was launched last week under cooperation between the Financial Transaction and Report Analysis Center (PPATK) and the Center for International Forestry Research (CIFOR), an international research and global knowledge institution committed to conserving forests.

The partnership between the PPATK, which was set up in 2002 to implement the Anti-Money Laundering Law, and the Bogor-based environmental organization is quite strategic in preventing illegal logging proceeds from entering the financial system.

As a center in charge of analyzing and investigating reports of suspicious transactions and of persons and financial institutions that fail to report suspicious transactions, the PPATK is technically competent to help banks and other financial service companies detect and prevent money laundering.

Since CIFOR is part of a vast network of national and international environmental organizations, has connections with hundreds of researchers in 30 countries and is adequately funded and staffed to conduct high-impact forest research, it is capable of assisting the PPATK and banks in detecting companies engaged in illegal logging and other forest crimes.

The latest move was made possible by amendments to the Anti- Money Laundering Law made last September, which include illegal logging and other crimes against forests and natural environments as sources of dirty money that is the object of the law.

While the anti-money laundering campaign won't provide a quick fix to the country's problem of deforestation, it is still a very important measure, as it will make it much less profitable for large companies to engage in illegal logging.

This move is part of a multi-pronged attack at illegal loggers that deploys market forces to curb deforestation through approaches in both the demand- and supply-sides, mobilizing consumers and traders to boycott products that are not certified according to international standards of sustainable forest management.

The increasing deployment of market forces against illegal loggers has been prompted by the government's failure to cope with the problem. The government's institutional capacity to prevent illegal logging has been utterly inadequate due to rampant corruption and lack of financial and technical capabilities.

CIFOR has estimated that, despite numerous laws and regulations on sustainable forest management at central and regional governments, illegal logging in Indonesia remains quite pervasive at 40 million cubic meters of annual deforestation.

The PPATK-CIFOR cooperation will not only make it more difficult for illegal loggers to put their money into the legal financial system; it will also step up efforts against lending to companies engaged in illegal logging or damaging the environment.

The rationale of this campaign is obvious: Businesses that damage forests and the environment are vulnerable to litigation, social hostility and other risks that threaten their operations and consequently impair their ability to repay bank loans. Hence, the basic principle of high-quality risk management requires banks to shun corporate borrowers and clients engaged in forest destruction.

This measure will not immediately make the government or forestry ministry more capable of preventing illegal logging. Big businesses might still bribe their way into illegal logging operations. However, the anti-money laundering and green-product, or ecolabeling, campaigns could make illegal logging much less profitable or commercially unfeasible, because poaching trees has no benefits if illegal loggers cannot obtain bank financing and cannot market their logs or timber freely.

All in all, the anti-money laundering and green-product campaigns strongly complement each other in the fight against illegal logging. Both measures use sustainable forest management as a tool to screen companies out of the market.

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