Trade-Based Money Laundering: What You Don’t Know Can Hurt You

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2 Responses

  1. Lauren great article. Trade Based Money Laundering is an area that needs increased attention and article like this should increase awareness to financial institutions active in the trade business, regulators and trade organizations. TBML is not new but it might be increasing in its utilization because of, as you explain, the expanded and enhanced monitoring to other money laundering mechanisms. TBML is very difficult to control and present many challenges:

    Manual intensive and time consuming: Identification of alerts and red flags might be time consuming for institutions that do not count with a sophisticated automated screening process. Automatic screening of names (individuals, legal entities, countries) is standard but, screening for high risk products, matching customs’ documentation with invoice and bill of laden, reviewing for consistency of quantities and goods involved, high risk jurisdictions and other red flags, might be a challenge for many institutions in a business operational environment that handles high volumes of documentation, where speed and low cost processing is key.

    Price reasonability: this is a key control, identifying potentially under/over invoicing of exports/imports is like finding the smoking gun. That said there is high limitations for doing an effective evaluation of prices and this is basically because of the absence of ready available databases that can be used to compare the price of the trade transactions with the average price in the market.

    I believe international organizations like the ICC (or OECD) should probably lead efforts to enhance the transparency of the international trade activity to reduce the risk of corruption and help to implement effective controls to prevent money laundering using trade business.

  1. January 24, 2015

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