From ESG to AML: following the money of environmental crime a case study of money laundering in the deforestation-cattle-finance chain

PurposeThis study aims to examine whether bank lending connected to environmentally destructive activities can give rise to criminal liability under anti-money laundering (AML) law. It challenges the prevailing framing of environmental risk in finance as a matter of sustainability policy, arguing that lending to borrowers whose revenues derive from environmental crime falls within the scope of criminal law.Design/methodology/approachThis study combines a doctrinal analysis of AML law with a case study of an investigation by the French National Financial Prosecutor concerning four French banks and their financing of Brazilian meat processors linked to illegal deforestation.FindingsRevenues generated through cattle raised on illegally deforested land qualify as proceeds of environmental crime. When such revenues are used to service debt or pay interest, these payments may constitute money laundering by integrating criminal proceeds into the financial system. Although EU environmental, social and governance (ESG) legislation excludes bank lending, existing AML statutes already apply to these financial flows. The French proceedings illustrate how this doctrinal possibility is beginning to translate into enforcement practice.Practical implicationsFinancial institutions must integrate environmental crime typologies into their AML risk assessments, due diligence and transaction monitoring. ESG reporting alone is insufficient.Originality/valueThis study offers the first systematic legal analysis of how lending operations can fall within the scope of money laundering when linked to environmental crime. It reframes sustainable finance by showing that bank liability does not depend on future ESG reform.