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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