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10 June 2021, 13:06


Trade compliance and Trade Based Money Laundering are hot topics


The goal of this article is to raise awareness of TBML risks.

Trade can be complex and complicated, reflecting the nature of supply chains stretching around the world.

As identified in the FATF’s 2018 Professional Money Laundering reportTrade-based Money Laundering is one the methods most preferred by money launderers. It is often combined with the use of front companies, front men, and other ML techniques.

Trade-based money laundering is highly adaptive and can exploit any sector or commodity. These are exploited by Professional Money-Launderers and Terrorist Financing networks, to facilitate myriad types of financial flows, including the laundering of proceeds of crime, such as from drug trafficking; the financing of terrorism; and the evasion of sanctions.

One criminal network using TBML was able to move $ 400m over several years.

Marcus Pleyer FATF President

What is Trade Based Money Laundering?

Trade-based money laundering is defined as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins.

How does Trade Based Money Laundering work?

TBML can involve the import and export of goods and the exploitation of a variety of cross-border trade finance instruments.

The traditional techniques were described in the initial 2006 FATF report and include:

  • under- or over-invoicing of goods;
  • under- or overvaluation of goods, and/or
  • phantom shipments, where no goods move at all.

These continue to be used for ML purposes as they are highly flexible and adaptable, despite changes in global trading patterns and the growth of new markets. These techniques are particularly effective when there is a complicit relationship between the importer and exporter, who are actively misrepresenting an aspect of the trade or the associated invoice settlement process. Therefore, authorities can have a greater impact if they can disrupt these complicit actors, whether through criminal prosecution or another form of disruption – e.g. removing their authority to trade

trade-based money laundering

Risk Indicators for Trade Based Money Laundering

Recently FATF in co-operation with the Egmont Group, the FATF has released a report about Risk Indicators related to TBML. The indicators are derived from a sampling of the data received by the FATF and the Egmont Group of FIUs in the course of the TBML project. These updated Risk Indicators from March 2021 can help public and private entities identify suspicious activity associated with it.

Examples of Trade Based Money Laundering

3 very common methods relate directly to invoicing these are called over-invoicing, under-invoicing, multiple-invoicing, and relate directly to charging a different amount than is due for the goods/services in question.

Another method, related directly to this, is often to misrepresent the quality of the goods in question to leave a gap between value or cost and the amount paid.

Recently in the media were also 4 Covid-19 not related common methods:

  1. Potatoes, Onions, and other fruits are bought conventionally in Germany and were exported to a company in Africa, but invoices directed large payments to accounts controlled by drug traffickers
  2. Fruit exports from New Zealand were paid by third-party shell companies, the fake invoices shown to banks called the shipment as “ceramic tiles
  3. Luxury cars were sold across borders by criminals with low values declared before the shipment. They were repaired and resold at near their undamaged prices
  4. Watches bought in Spain and Switzerland by export and import companies were used to transfer value to drug traffickers in Morocco and the Netherlands


How can firms combat Trade Based Money Laundering?

The right transactions monitoring system in place that uses all your data points makes it much easier to find suspicious cases.

How can Trade Based Money Laundering be reduced?

An effective compliance program that includes a TBML Transactions monitoring system can reduce the risk within your organization.

Is TBML also taking place in unregulated sectors ?

Non-financial companies who might not be regulated have to comply with money laundering, bribery and other (financial) crime legislation and are therefore a target of potential TBML risks as not all TBML involves trade finance.

Does TBML occur in the Media ?

It is a hot topic in the media. Recently the FT Weekend published an article on 2. January 2021 by Matthew Vincent covering TBML.
Covering latest trends and over and under-invoicing of products and also topics mentioned in the December 2020 issued report on TBML

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