Investigating Foreign Political Links in Timber-Producing Countries


Is there a need to investigate businesses and individuals with foreign political links in timberproducing countries? At the time of writing, it is the International Day of Forests. Established by a 2012 United Nations General Assembly Resolution, every 21st day of March since then have been heralded as a day to celebrate and highlight the significance of our forests.(1) It is on this day, 21st March 2016, that Project LEAF (Law Enforcement Assistance for Forests) of INTERPOL spoke out (again) about the link between corruption and the global trade in timber. An estimated $30 billion of government revenue is lost every year as a result of corruption in timber trade.(2) This article will shed light on the indiscriminate destruction of our forests, under the guise of economic development for the financial benefit of elites at the highest level of the political system and how international, regional and national laws on anti-­corruption are implicated.

Guest blog by Shirleen Chin, Legal Officer, Institute for Environmental Security, 24 March 2016

The world has suffered a big loss in its forests. Some countries feel the pinch more than others merely because of their location in the tropics or the availability of sought-­after wood. The image below is a median projection of forest lost between 2000 and 2014. North America and Russia remain the countries with the highest deforestation rate. However, in relation to the size of the countries, South America, Africa and Southeast Asia are experiencing massive losses. According to research, these regions are notoriously known for their lack of transparency, lax laws and weak enforcement. These elements together create the opportunity for corruption to thrive.

The natural resource curse contends that countries with an abundance of natural resources grow less rapidly than those with fewer natural resources. These countries fare less well, if not at all, in the economic, social and judicial arenas. In addition, the political environment is often one that is riddled with issues of corruption. So instead of feeding back the profits from deforestation into the local government for the benefit of economic development, corruption directs the flow of profits into the pockets of a select group instead.

The decision to cut (and then more) lies with a handful of elites

Recognising the United Nations General Assembly Resolution 1803 (XVII) of 14 December 1962 on the Permanent Sovereignty over Natural Resources and Principle 2 of the Rio Declaration, adopted at the United Nations Conference on Environment and Development in 1992, every country has the sovereign right to exploit their own natural resources pursuant to their own environmental and development policies. However, is this sovereign right abused in some countries?

Over 90% of the world’s natural forests is administered by the government. The rest is privately owned by companies and individuals or legally occupied by indigenous peoples. As “guardians” of the forests, government officials are given the important task of contracting logging permits or concessions to winning bidders who in turn are allowed to use and cut down the forests.

In countries where corruption is practised or where political patronage is high, the bidding process may be rigged and contracts may be awarded by corrupt government officials who decide on the basis of what is best for them personally. This leads to a catch-22 situation: corrupt practices culminate in the loss of revenue and royalties to the governments who were entrusted to deliver economic growth to their citizens in the first place.

Corruption does not necessarily end upon the awarding of the licence or concession; political patronage does not exclude a hand in the timber business. Trees that are cut need to be transported, processed, exported and turned into end products. In some instances, the companies that can provide these services are led by the individuals who were involved in the initial awarding of the licence or concession. Cronyism is a common practice if a family member or friend happens to own the company that provides the service (i.e. association by nepotism). Proceeds earned through corruption along the supply chain usually find their way out of the country and into foreign ones where secret bank accounts are set up, properties are bought and company subsidiaries are established. Again, this is a massive loss of potential income to the country and is an issue that warrants more attention.

International journalistic investigations on Peru, the Democratic Republic of Congo, Liberia, Myanmar and Malaysia have uncovered that a handful of powerful political elites are usually the ones behind illegal logging and related trade.(3) Because of weak national accountability systems, these elites and their cronies hide under the many layers of immunity and corporate veil that the law provides. As a result, they amass millions if not billions over the course of many years while the average citizen struggle to make ends meet in today’s fast-paced and globalised world.

The legal Instruments

The 2005 United Nations Convention against Corruption (UNCAC) obliges States Parties to establish criminal offences for a range of corrupt practices, extending to acts such as the concealment and laundering of the proceeds of corruption. When corruption is recognised as being part of an organised criminal network, States Parties to the United Nations Convention against Transnational Organised Crime (UNTOC) must have in place measures against money laundering, corruption and the obstruction of justice. At the regional level, Africa has introduced the Southern African Development Community Protocol against Corruption and the African Union Convention on Preventing and Combating Corruption. To date, there has yet to be a comprehensive and regional anti-corruption instrument in South America and Southeast Asia.

Nonetheless, the United States and the United Kingdom are economic powerhouses that have two of the most far-reaching anti-­corruption instruments – the 1977 Foreign Corrupt Practices Act (FCPA) and the 2010 UK Bribery Act. The following paragraphs will only elaborate on the FCPA as the UK Bribery Act is a topic that warrants a separate discussion.

Although it is an American piece of legislation, the FCPA has been very instrumental at bringing charges against foreign nationals and companies; it has casted a wide net as a result of broad judicial interpretations and a 1998 amendment by the US authorities. Foreign nationals and companies can be a cause for FCPA enforcement action if they violate the FCPA by virtue of “presence” in the territory of the US. They can be categorised as “domestic concerns” or “persons and entities other than ‘issuers’ or ‘domestic concerns’”. Further, theories of aiding and abetting as well as conspiracy to violate provisions of the FCPA have been used to assert jurisdiction over foreign nationals and companies. US authorities are known to pursue an expansive jurisdictional theory in pursuit of an enforcement action.(4) Plus, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have a broad and sophisticated range of investigative tools at their disposal. For big cases, the Federal Bureau of Investigation (FBI) is typically called in to assist in investigations. The risk of litigation should place pressure on foreign nationals and companies to be compliant.

Should any link be found that traces back to the corrupt elites and their cronies in the timber-producing countries, the DOJ and SEC could exercise either criminal or civil enforcement authority over them by virtue of their activities within the US or merely conspiracy to violate the provisions of the FCPA.

Under the FCPA, there is also the 2010 Kleptocracy Asset Recovery Initiative. This initiative was introduced in an effort to halt the flow of illicit money into the US via activities such as buying high- end property or setting up shell companies. Ultimately the goal is to recover assets stolen by foreign officials and laundered in the US for repatriation back to the countries from which they originate.(5)

Many timber-­producing countries are States Parties to the UNCAC and UNTOC. However, since there is a lack of enforcement oversight with these international treaties, one would have to fall back on regional treaties that apply, if any, in the absence of which recourse should be had to national laws. In the perfect world, all countries should have robust anti-­corruption laws in place. If a country is unable or unwilling to deal with corruption practices at the highest level or within “well-­connected” businesses, one could turn to the FCPA until such a time when effective national law and its enforcement are available.

1 This initiative did not happen overnight. In fact, this day (formerly known as “World Forestry Day”) has been around since 1971 at the instigation of the Food and Agriculture Organisation.

2 INTERPOL, ‘International Day of Forests: the role of environmental security’ <> accessed 21 March 2016.

3 See reports from Global Witness, the Environmental Investigation Agency and the Bruno Manser Fund.

4 Tween, D and Tomas, J, ‘Inside the FCPA: The (Very) Long Arm of the Law: FCPA Jurisdiction Over Non-­U.S. Companies and Individuals’ (18 June 2013) <> accessed 22 March 2016.

5 Note: In 2015, the United Kingdom introduced the International Corruption Unit whose functions mirror the goals of the Kleptocracy Asset Recovery Initiative.