How to "follow the money" to stop IUU

Illegal, unreported, and unregulated fishing (IUU) is a scourge of the seafood industry and, by some estimates, a trade worth USD 23 billion (EUR 19.7 billion) annually.

But there are increasingly ways of using modern traceability technology to trace IUU culprits and hold them to account through their investors and banks.

The threat of being dropped from a fund – and public reportage of this – is a powerful source of leverage. Companies suspected of IUU are assessed according to Hilde Jervan from the Council of Ethics at the Norwegian Pension Fund. Speaking at the SeaWeb Seafood Summit in Barcelona, Spain, on 19 June, Jervan discussed the varying degrees of cooperation given by companies in which the Norwegian government pension fund has invested.

“We ask for information on vessels, fishing rights, sourcing, and management systems,” she explained.

“We don’t always get the information,” explained Jervan, who detailed different responses from two fishing companies recently monitored by her office. One denied and refused to elaborate, while another found the information useful and acted on it. 

Another company hadn’t even factored the IUU risk into its reporting systems, according to Jervan, even though Jervan’s office had asked several fishing companies to include IUU in its annual reports and also that its commitment to non-IUU sourcing be communicated externally and internally.

IUU has moved up the agenda of investors worried about being connected to a reputational risk, according to financial crime specialist Rob Lake, the director of Rob Lake Advisors. Lake pointed to examples such as the Norwegian government’s investment fund facing criticism for investing in South Korean shipping conglomerate POSCO after the latter’s Indian port project was ensnarled in a human rights controversy. Likewise, pension funds have been spooked by allegations of slave labor in the Thai tuna industry. 

IUU is a risk to the supply chain, hence a risk to investors. But lenders like banks can also face pressure from IUU campaigners. 

“Banks will take out their money when there’s a risk … you don’t necessarily need full proof,” said Kees Lankester, a seafood finance advisor and founder of Dutch-based consultancy Scomber. He encouraged campaigners to “speak their language … financiers speak in terms of financial risk, not risks as we might see them.” 

Likewise, campaigners need to look beyond vessels and fishing companies to the holding companies and their related banks. Lankester detailed a ranking of the top 30 seafood companies and their parent holdings’ links to some of the world’s best-known banks, including UBS, Barclays, Bank of China, and HSBC. 

Major Japanese banks have large shareholdings and loans with three seafood companies in Japan. As another example, in Spain much of the shares in newly restructured Nueva Pescanova are held by a range of local banks as well as HSBC (5.2 percent). These banks are in turn owned by shareholders which include major western hedge and pension funds. 

Sufficient information is key, according to Lake. But likewise there is also the question of how much influence an investor has. 

“It’s very difficult for an NGO to make something financially material,” Lake said. “If a [fishing] company is found to be acting illegally the investor or lender will ask what will be the impact on the company’s ability to repay the loan.”

The best case is to highlight it as a reputational rather than financial matter, Lake said.

The increasing focus on money laundering in recent years – part of an ongoing global government effort to limit tax evasion – meanwhile creates an opportunity for the anti-IUU fight. In fact, the links between fishery and crime (drug dealers, smugglers using trawlers) has led to the establishment of a fishery crime section at the Norwegian police force. Banks tend to pay more attention to money laundering, which is both a compliance and a reputational risk, whereas environmental and social issues are usually a reputational risk only.

Meanwhile, federal authorities worry about how IUU fishing can result in a loss of money to society. Collaboration between CSR and compliance officers at banks and their counterparts working against money laundering is a potential source of collaboration in IUU related investigations, Lake said.

But despite their best efforts campaigners against IUU need to bear in mind the limits of punishment as a deterrent for culprits. 

“It’s very hard to get anyone behind bars,” Lankester said. There are very few known examples of any successful prosecutions of perpetrators of illegal fishing, aside from the Carlos “The Codfather” Rafael, who’s currently in a U.S. jail for misreporting his catches.


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