A report estimating annual losses of US$289 million linked to illicit financial flows in Cameroon’s timber trade between 2013 and 2023 has shed new light on weaknesses in forest governance. In this exclusive interview with Environnementales, Matti Kohonen, Executive Director of the Financial Transparency Coalition (FTC), explains why actual losses are far higher than previous official estimates, how shell companies and hidden joint-ventures conceal the real beneficiaries of the timber trade, and why the European Union’s anti-deforestation regulation may fall short without transparency regarding the owners of forest concessions.
Why does Cameroon appear to be losing far more money than previous official estimates suggested ?
We found significantly higher losses than the previous estimate of US$59 million per year linked to illegal deforestation, mainly because we used a different methodology. In our report, we applied a trade misinvoicing assessment methodology known as the Partner Country Method (PCM), developed by our member organisation Global Financial Integrity (GFI) together with the United Nations Office on Drugs and Crime (UNODC).
We examined discrepancies between Cameroon’s exports and imports of wood products (HS Code 44) from 2013 to 2023, the latest period for which data were available in the UN COMTRADE database. We then calculated differences between export and import values, taking into account explainable factors such as the distinction between Free on Board (FOB) export prices and Cost, Insurance and Freight (CIF) import prices.
Some countries report both values, and we found that the average difference between them is around 8%. Even after adjusting for this variation, we identified an average unexplained gap of US$289 million per year over the period 2013–2023.
Previous estimates of US$59 million annually were based on assessments of corruption in the forestry sector rather than trade misinvoicing. Furthermore, although this figure was cited in a government publication in 2021, it appears to originate from data dating back to 2013.
What are the main mechanisms currently used to conceal the real beneficiaries of the timber trade in Cameroon?
The main methods involve corporate structures that make it impossible for authorities, journalists and civil society organisations to identify the beneficial owners — the natural persons who ultimately own and profit from companies.
While investigating companies that had been fined for illegal logging in Cameroon, we found no publicly available information on their beneficial ownership in databases operated by Moody’s, such as Orbis, despite extensive research.
Cameroon has established a beneficial ownership register in line with anti-money laundering recommendations from the Financial Action Task Force (FATF). However, this register is not publicly accessible in most sectors, and there is no specific transparency requirement for forestry.
Some ownership information is publicly available through the Extractive Industries Transparency Initiative (EITI), but forestry does not fall within the extractive industries sector.
Even where companies disclose beneficial ownership, they may only report a foreign shell company. Accessing the beneficial ownership details of that shell company can be extremely difficult, even through official requests. Most countries do not provide public access to beneficial ownership registers, with only a few exceptions such as the United Kingdom, Ghana and Nigeria.
Another common practice involves hidden joint ventures. These arrangements may conceal the individuals exercising control over forestry operations through undisclosed financing and ownership agreements, even though such individuals should legally be recognised as beneficial owners.
Can the European Union Deforestation Regulation (EUDR) truly work without transparency regarding the owners of forest concessions?
In our view, the EUDR cannot function effectively without identifying the beneficial owners of forest concessions.
Knowing which companies hold concessions is an important first step, and this information is already available. Through our mapping work, we can identify concession-holding companies across Cameroon. However, we also need to know the individuals behind those companies.
The EUDR requires verification that commodities covered by the regulation are not produced on recently deforested land. Satellite data can help determine whether deforestation has occurred, but they do not reveal who owns the concessions or who ultimately benefits from them.
We often know the names of companies operating in Forest Management Units (FMUs) and Sales of Standing Volume (SSVs), but we know very little about the people controlling those entities.
All the forest concessions we were able to map can be viewed here: https://bcovaro.users.earthengine.app/view/use-land-cameroon
What urgent measures should the Cameroonian government adopt to reduce illicit financial flows in the forestry sector?
To reduce illicit financial flows, Cameroon should ensure public transparency of beneficial ownership for the forest concessions responsible for most logging activities, particularly FMUs and SSVs.
This would make it possible to determine whether the same individuals control multiple companies that continue winning forestry concessions, including after one of their companies has been sanctioned and excluded from future bidding processes.
Greater transparency is also needed regarding timber supply chains. Although we can map logging activities carried out by sanctioned companies, we often do not understand the wider supply chain because the company exporting the timber is frequently different from the one holding the concession.
The government should also strengthen oversight of trade pricing, conduct more audits of transfer pricing and export transactions, and investigate forestry companies exporting timber at unusually low prices.
This may require joint investigations with importing countries. In addition, authorities in destination markets should use information on forestry sanctions issued in Cameroon to prevent illegally sourced timber from entering their markets.
The necessary legislation already exists. However, because ownership structures and supply chains remain opaque, it is still relatively easy for illegally sourced timber to reach major destination markets, including Europe, the United Kingdom, China and Vietnam.
Interview conducted by Boris Ngounou
