dogs-AML

The increasing risk of money laundering through illegal dog trafficking

Criminals will infiltrate any business that will garner financial gain, or cover up their other illicit activities. We’ve already seen this through fishing, the cattle trade, and through shipments of gold. But while these industries may seem far-flung to those not involved in the process, financial criminals are hitting far closer to home, laundering money through man’s best friend.

The illegal dog trade has been very much on the radar of prosecutors, NGOs and financial investigators for the past decade, albeit the penalties handed to organized crime gangs for the offence have not gotten any harsher. The activity of selling unhealthy, illegally bred canines has seen a drastic increase in recent times, particularly as a result of the pandemic, and it must now surely ramp up pressure for governments, regulatory bodies and financial institutions to impose drastic legislation and sanctions to hinder the heinous crime.

Capitalising on fads

With dogs continually poised as the ultimate companion to humankind, they become a prime target to criminals ignorant of animal rights violations. Indeed, much like any illegal animal-smuggling activity, puppies are raised in horrific conditions, where mothers are forced to breed in disease ridden dens to meet demand for in-vogue dogs.

Certain dog breeds seem to experience a renaissance; a fashion statement as well as a loved family member, championed by celebrity culture at the time. In 2017, a surge of popularity for French bulldogs was rife, causing organized crime syndicates to focus their attentions away from drug or human trafficking to puppy-smuggling. In this year, it was estimated that crime lords were profiting nearly $40,000 a week from the practise, with around 200 puppies smuggled into the UK every day by around 100 gangs, many operating in Romania.

There are numerous reasons why criminals scoped out this opportunity. In 2011, pet passports allowed for dogs to enter Britain without the need to go into quarantine. Puppies of ill health could therefore enter the country to be sold on undetected. Companion animals (not limited to dogs) were also legally stated as ‘objects of rights’, that can be bought and sold and therefore at risk of commodification.

Covid’s impact

That picture has only negatively ballooned in the years since. Demand for puppies in Europe is so high that around an estimated 8 million new dogs are needed each year to fulfil that want. Even more shocking is that only an eighth of those are reared by licensed breeders or breeding facilities. Much like any trade-based money laundering technique, traffickers see dogs as an easy way to be domestically produced, and trafficked from cheaper countries cross-border through easy means of falsifying payments and documents. There are also multiple touchpoints to make the AML tracking of dogs difficult; breeders, transporters, and retailers all in limited capacity roles. Puppies are often newborn and transported in cages in cars, or unfortunately hidden in floorboards and walls.

This illegal trade is attractive to organized gangs as it generates more money than others, including the illegal organ trade. The UK, Swiss and EU online dog trade is estimated to garner around €1.5 billion, so much so that “Zoo-Mafias” have been coined by the Italian authorities.

In the UK particularly, the covid-19 pandemic has seen a surge in ‘dog-knapping’, with gangs stealing the pets of owners for a quick buck. A UK charity, DogLost, identified that compared to 172 stolen dogs in 2019 (still a drastic number), around 465 thefts were reported in 2020. Sadly, only 1% of this crime in recent years has resulted in some form of prosecution. The ease of selling dogs online has become easier for criminals, distributing on legitimate sites including eBay, Facebook marketplace and Gumtree, who need to set up strict protocols to remove any blame from consumers unwittingly purchasing ill pups from launderers.

Whatsmore, on top of other fatal illnesses pervading the world, the crime of trafficking illegal dogs is another huge public health crisis. With the dogs bred in dirty conditions, the risk of disease being transmitted from country to country and person to person is astounding. OCCRP outlines that it poses a bigger problem on public health than other illegal wildlife trade and kills more European animals than the European arms trade kills humans.

Saving pets and people

Regulators and financial investigators both have an onus to flush out the illegal activity of puppy smuggling and the flow of its financial gain (as well as cash that may have been collected from other organized crime activities).

Such pioneering examples as the Biocrime Project, which targets illegal pet trafficking on the Italian-Austrian border, are one way to investigate trafficking at the source. But as this is confined to a specific jurisdictional area, more needs to be done to make the investigation of dog trafficking more EU-wide, and even further afield. This would be a huge help for governments and financial institutions to clamp down on the activities, and subsequent penalties, of perpetrators.

Already, the European Parliament looked to clamp down on unlawful pet trading adding a resolution in February 2020, and requiring all dog breeders to register with national authorities under the EU Animal Health Law. Online platforms will be forced to regulate themselves under the EU Digital Services Act too. However, with various countries operating of their own accord, many without compulsory Identification and Registration (I&R) protocols, a centralised database for the EU should become commonplace, stopping criminals attacking loopholes in the current ‘pet passport’ scheme.

For banks and financial institutions conducting AML investigations, utilising an EU-wide database would be a great way to detect illicit financial flow from animal trafficking. UBO registers go some way in identifying the hierarchical structure of organisations that can include various strands (i.e. shell companies), and these could play a role in tracking criminals’ involvement in the illegal pet game when a mandatory microchipping programme is rolled out to identify illegally bred puppies. A public register can also instil confidence in consumers looking to purchase legitimate dogs. Repeat offenders can also be flagged by financial bodies by the imposition of sanctions. With banks focusing on activities by organized crime groups, including tax evasion, these offences can be one way to identify their role in illegal pet trading and impose stricter regulations.

Stringing together the web of trafficked dogs – from the illegal breeding programs to transporters to eventual sellers, and the organized gangs that run the show – requires a large partnership of AML investigators, specific organisations and EU officials. By targeting offenders, individuals profiting from the proceeds can then be identified by banks through effective KYC and AML methods and public registers. By implementing a holistic, cross-jurisdictional method of tracking puppies from birth to sale, the health and wellbeing of all can be accomplished, we just need more time to get there.