Financial institutions are discovering an unlikely ally in the war against dirty money: environmental, social, and governance (ESG) standards. As criminals funnel an estimated $110-$281 billion annually through environmental crimes alone, banks are learning that tracking illegal deforestation and human trafficking is not just good for the planet, it is essential for catching money launderers.
The numbers tell a stark story. Environmental crime now ranks as the fourth-largest criminal enterprise globally, trailing only drugs, counterfeiting, and human trafficking, according to the Financial Action Task Force.[1] What is more alarming: these crimes are growing three times faster than the global economy, yet remain a low risk, high reward venture for criminals thanks to weak enforcement.[2]
Against this backdrop, sustainable investing has exploded. Bloomberg Intelligence projects ESG assets will hit $50 trillion by 2025, more than a third of all money managed globally.[3] As chief risk officers (CROs) face increasing complexity where risks converge, approximately 63% expect fraud risk management to become an even bigger priority over the next three years.[4]
Where Dirty Money and Dirty Business Meet
The connection between financial crime and ESG failures is not abstract. When loggers illegally clear rainforest in Southeast Asia or miners strip minerals from conflict zones in Africa, they need ways to make that money look legitimate.
Criminals have perfected the playbook: set up shell companies early in the supply chain to mix legal and illegal money, exploit corrupt officials to grease the wheels, and hide behind complex offshore structures that obscure who really owns what. The Financial Action Task Force has documented these patterns extensively in its research on money laundering from environmental crime.[1]
For compliance teams, this creates both a challenge and an opportunity. Nearly two-thirds of CROs now say fraud prevention will be an even bigger priority over the next three years, according to recent research.[4] Integrating ESG data into anti-money laundering (AML) programs gives them a new lens on risk.
A New Toolkit for Risk Assessment
Banks are now layering ESG indicators into their risk models alongside traditional red flags to help identify risks that conventional screening misses.[5]
The approach is straightforward but comprehensive. Customer profiles now flag companies in extractive industries, forestry, or waste management. Social screening catches labor violations or connections to conflict zones. Governance checks examine beneficial ownership transparency, regulatory history, and links to politically exposed persons.
Industry analysts say this holistic view helps banks spot vulnerabilities that traditional compliance might overlook. When a mining company in a high-corruption country shows opaque ownership and a history of environmental violations, the combined signals paint a clearer risk picture.
Transaction monitoring systems are evolving too. Unusual payments to entities in environmentally sensitive regions, trades involving sanctioned commodities, or money flowing to jurisdictions with weak anti-corruption laws now trigger enhanced scrutiny.
From Theory to Practice
The Association of Certified Anti-Money Laundering Specialists sees natural synergies between ESG and financial crime programs.[6] Both aim to improve the quality of money flowing through the financial system, the organization notes in its white paper on the topic.
Due diligence teams are changing their workflow. When evaluating high-risk clients, compliance officers now consult ESG data providers and sustainability ratings alongside their usual intelligence sources, and work to address environmental crime throughout the entire compliance framework, from board-level oversight down to transaction monitoring.
This means crafting risk appetite statements that align both ESG and financial crime considerations, particularly for sectors like mining and forestry where risks overlap most dramatically.
Regulators Take Notice
Global financial watchdogs are paying attention. Regulators continue to emphasize the need to integrate ESG factors into AML programs, reflecting growing recognition that these risks are interconnected.
The Financial Action Task Force has gradually refocused its guidance to cover ESG issues, publishing reports on illegal wildlife trade, human trafficking, labor exploitation, and illicit mining.[7] The Basel Institute on Governance went further, incorporating environmental crime data directly into its Basel AML Index, which ranks countries and money laundering risks.[8]
The change reflects a stark reality; limited cooperation between traditional AML authorities and environmental crime agencies has created gaps that criminals exploit. The Financial Action Task Force identified this as a major barrier to effectively tackling money laundering from environmental crimes.
The Growing Pains
Despite momentum, integrating ESG into AML frameworks is not easy. ESG data quality remains inconsistent across providers. Compliance teams need new expertise to interpret sustainability indicators effectively, and these skills do not come cheap.
Industry analysis shows that combining these programs demands significant investment in training and technology. There is also a delicate balance to strike, as banks must avoid unfairly penalizing legitimate businesses in developing economies where ESG standards may lag.
Regulatory expectations vary widely too. Some jurisdictions explicitly encourage ESG integration in financial crime risk management. Others maintain stricter separation between compliance and sustainability functions. Navigating these differences adds complexity for global institutions, but the results may be worth it.
The Path Forward
For all the challenges, research suggests the integration creates real value. Organizations can streamline compliance activities and share resources between teams, generating cost savings and operational efficiencies.
This convergence reflects a maturing understanding that financial crimes, environmental destruction, and social harms do not exist in separate silos. As the World Bank points out, illegal mining, deforestation, and wildlife trafficking cost far more than money, they require governments to track down and seize criminal proceeds before further damage occurs.[9]
Financial institutions that build ESG integration into their risk frameworks now will be better positioned to protect themselves and society from the full spectrum of illicit finance. By viewing anti-money laundering through an ESG lens, banks can move beyond checking compliance boxes toward addressing root causes.
Today, the question is not whether to integrate these programs, but how quickly institutions can do it effectively.
References
2. https://www.sanctions.io/blog/managing-the-role-of-esg-risk-in-aml-4-things-to-know
4. https://www.ey.com/en_ca/insights/consulting/risk-consulting-services/esg-driven-aml-a-new-paradigm
5. https://kpmg.com/mt/en/home/insights/2023/02/convering-aml-into-esg.html
6. https://www.acams.org/en/ESG-and-AFC-Convergence
9. https://blogs.worldbank.org/en/psd/following-the-money-from-environmental-crimes—a-call-to-action
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
