Potential alliance between FinCEN and Justice Department Environmental Crimes Unit presents a potent law enforcement combination for companies to monitor

Eversheds Sutherland (US) LLP
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Eversheds Sutherland (US) LLP

As companies continue to focus on improving their ESG credentials, they are constantly assessing their environmental management systems and compliance programs for potential areas of ESG-related risk. The reason is straightforward – these internal programs present the organization with the tools necessary to assess compliance with environmental laws and regulations. Recognizing the significant exposure that non-compliance may incur, these systems are relied upon to provide the company with advanced warning of instances in which the company might run afoul of the law.  Traditionally, such non-compliance would be investigated on the federal level by the U.S Department of Justice’s Environmental and Natural Resources Division or, in more serious cases, the Environmental Crimes Section. The Environmental Crimes Section has been a particularly robust enforcement agency, collecting over $4 billion in criminal fines over the past 25 years for crimes that cause damage to the “nation’s ecological and wildlife resources.” Existing environmental management systems have been developed to reflect the priorites of such agencies.

However, a new concern on the horizon, which may elude detection by traditional environmental management schemes, is FinCEN’s new focus on environmental crimes. Raising the stakes even further is the involvement of other federal agencies in coordination with FinCEN’s new focus on environmental crimes. The Environmental Crimes Section is known to be aggressive in its prosecution of environmental crimes, particularly since federal environmental criminal statutes often impose strict liability on the perpetrators. A FinCEN/DOJ alliance on environmental crimes would be a remarkably potent law enforcement combination. FinCEN has long been the U.S. financial watchdog for criminal financial activity, monitoring money laundering, terrorist financing, and sharing financial intelligence across government agencies. A recent FinCEN Exchange indicates that FinCEN is looking to expand outside of its traditional mission to focus on financial activity relating to “environmental crimes.” FinCEN convened an event focused on “identifying and combatting illicit financial flows associated with environmental crimes.” Included in the event were other federal agencies. The scope of the “environmental crimes” discussed covered a wide breadth, covering any illegal conduct that harms “human health,” “nature and natural resources,” and causes “the overexploitation of natural resources, and thereby increasing carbon dioxide levels in the atmosphere.” This is a noteworthy expansion of FinCEN’s own stated mission, which is generally limited to money laundering and financial activities. A FinCEN/DOJ alliance on environmental crimes would be a remarkably potent law enforcement combination. 

As companies ramp up ESG efforts, this is an emerging development that may be worth flagging for companies that have exposure in these areas. This is a new liability vector wrapping in both financial transactions and environmental activities that existing compliance systems may not be equipped to address. Prudence dictates that organizations assess their environmental compliance systems in light of these developments. 

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