Nature Credits: Europe’s Next Financial Crime Blind Spot

The European Commission’s expert group on nature credits is advising the Commission on how nature credits should work, and the UN Biodiversity Conference (COP17) opened in Yerevan on 19 October. The group has a workstream on ‘Governance and Integrity’, and, according to Bellona’s account of the group’s third meeting, the Commission has presented plans for a federated registry in which each credit carries a ‘digital passport’ leading to a full digital audit trail. That is serious work. What is missing is the question a financial crime investigator would ask first: who is obliged to know the customer?

What the Carbon Market Taught

The EU has built a registry-held environmental market once before, and paid for each gap separately. In December 2009, Europol reported that fraud in the EU Emissions Trading System (ETS) had caused ‘losses of approximately 5 billion euros for several national tax revenues’ and estimated that in some countries ‘up to 90% of the whole market volume was caused by fraudulent activities’; the fix was a change to VAT rules. In January 2011, the Commission suspended all transactions other than allocation and surrender in every national ETS registry after ‘recurring security breaches in national registries over the last two months’; the fix was registry security. And only from January 2018 were ETS allowances classified as financial instruments under the revised Markets in Financial Instruments Directive (MiFID II), bringing market abuse rules and anti-money laundering safeguards. Three gaps, three fixes, each after the loss.

The voluntary carbon market, which never received that third fix, shows what is left. RUSI’s own scoping study of July 2025 identified ‘limited know your client and anti-money laundering controls’ among its corruption risks.

A Roadmap Without a Threat Model

The Commission’s Roadmap towards Nature Credits of July 2025 is a careful document. It asks for safeguards against greenwashing and double counting, and it insists that project developers, certifiers and registry operators be kept apart. But in its 11 pages the words fraud, money laundering and crime do not appear once, and it does not say whether a nature credit is a financial instrument or anything else that would bring its brokers under customer due diligence. Governance frameworks, it says, ‘must clearly define the rules for ownership, registration, transfer of credits, independent verification’; the Roadmap dates its dedicated action on designing them to 2027, when the Commission will invite its expert group to advise.

The international frame adds nothing. Target 19 of the Kunming–Montreal Global Biodiversity Framework, whose first global review is the business of COP17, encourages ‘biodiversity offsets and credits’ with ‘environmental and social safeguards’. Financial integrity is not among them.

The Playbook Already Exists

The risks are not speculative. In its 2013 Guide to Carbon Trading Crime, Interpol listed five ways criminals exploit carbon markets: manipulating measurements to claim more credits than a project earned; selling credits that do not exist or belong to someone else; making false or misleading claims about the environmental or financial benefits of investments; exploiting weak regulation for money laundering, securities fraud or tax fraud; and hacking and phishing to steal credits. It warned that project developers ‘might use those projects as a mechanism to filter illegally obtained funds’, and found it unclear whether anti-money laundering rules ‘would necessarily apply to carbon traders’.

All five apply to nature credits, and two apply with greater force.

The first is measurement. A tonne of carbon is at least a single unit that can be measured. A nature outcome, such as a recovering species or a habitat in better condition, is a judgement assembled from field evidence. Where that evidence can be checked only by the party paid for the outcome, an inflated claim looks exactly like an honest one.

The second is laundering, and geography makes it worse. Nature credits will pay landholders in landscapes where environmental crime already operates; the Commission itself, in announcing its July 2026 infringement decisions, calls environmental crime globally ‘the fourth largest organised crime activity’. The typology is simple. A trafficking network channels proceeds through a front landholder whose biodiversity outcome nobody independent can audit; credits are issued against it, bought through a broker with no due-diligence duty, and resold. The money emerges as conservation revenue. Banks along the way are obliged entities, but they see a lawful purchase of a lawful credit; the gap lies with the brokers, registries and verifiers that handle the credits themselves.

Small Enough to Secure

The timing is, for once, favourable. BloomLabs, which tracks the voluntary market, counts $6.99 million of biodiversity credits sold from the first recorded sale in early 2022 to August 2026, and $25,534 across 85 transactions in September 2026,against a monthly median of $97,000 since 2024. Yet the same tracker counts nine governments moving on biodiversity credits in August alone, and another registry opened on 2 September. The emissions market was secured after losses counted in billions. This one can be secured while all its recorded sales since 2022 come to about $7 million.

Criminal law will not close the gap on its own. By mid-July, 23 of the 27 member states had still not notified full transposition of the new Environmental Crime Directive, nearly two months after its deadline.

What Brussels Should Decide Now

Three decisions would close most of the gap, and none needs to wait for 2027.

First, propose that brokers, registries and verifiers of EU-recognised nature credits be added to the obliged entities of the Anti-Money Laundering Regulation, with the Commission’s financial services department and the new Anti-Money Laundering Authority involved from the start. Obliged-entity status, rather than classification as a financial instrument, would bring customer due diligence and suspicious transaction reporting without burying a small market in securities market rules. Simplified due diligence can protect smallholders and indigenous landholders from being priced out.

Second, write account holder and beneficial ownership identification, sanctions screening, unique public serial numbers, public retirement records and a cross-registry check against double issuance into the federated registry and its digital passport before any registry is recognised. The 2011 suspension was the price of setting such standards after the accounts were open.

Third, give the integrity workstream a financial crime risk assessment, informed by Europol and national financial intelligence units, before the governance advice of 2027 is written; and require every methodology to state how its outcome claims can be re-checked from primary field evidence by someone other than the seller, at the same scale as the claim itself.

In Yerevan, where it launches a Friends of Credits for Nature and Biodiversity initiative on 27 October, the EU will arguethat private money must help close the gap in biodiversity finance. It will argue more convincingly if it can show that the market it is building was designed with the people most likely to exploit it in mind.

Declaration of interest: Albertus Geldenhuys manages the Terra Perpetua Conservation Division of The Art Company AG, Zug; the division is developing a commercial business in wildlife conservation finance, and the company holds a Swiss registered trademark in this field. He holds a granted US patent on the analysis of cultural artefacts and has patent applications pending on wildlife identification, provenance and conservation verification. This article names no product or supplier; the third recommendation concerns a kind of verification in which his business is active.

© Albertus Geldenhuys, 2026, published by RUSI with permission of the authors.

The views expressed in this Commentary are the authors', and do not represent those of RUSI or any other institution.

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