Tackling Trade-Based Money Laundering (TBML)

Trade-Based Money Laundering (TBML) is a sophisticated method used by criminals to complicate and disguise the origins of illicit funds through global trade transactions. Unlike traditional money laundering through financial institutions, TBML exploits the complexities of international trade.

TBML is similar to a tricky dance where criminals manipulate invoices, transactions, and paperwork, creating a confusing financial puzzle. Below we explore how international trades are being manipulated and suggests a few counter measures to detect and reduce these illicit activities.

  • Common TBML Techniques as mentioned above include Over-Invoicing and Under-Invoicing, where criminals manipulate the value of goods on invoices to move money across borders undetected.
  • Creating multiple invoices for the same shipment which confuses authorities, and aides the movement of discreet funds.
  • False Documentation or phantom shipments, where money launderers create fake trade transactions or invoices for non-existent goods and bills of lading.
  • Round-Trip Transactions is another ingenious method where goods are sold and shipped with the understanding they’ll be returned, primarily moving money.

The million dollar question is how can the above be prevented in a proactive and transparent manor, the answer is not is not simply. Financial Institutions themselves play a crucial role in preventing TBML by implementing robust measures and intelligent solutions to enhance these efforts, below I have listed a few:

  • Carrying out Enhanced Due Diligence to thoroughly scrutinize clients engaged in international trade, verifying trade documentation authenticity.
  • Implementing Transaction Monitoring systems to identify out of norm patterns or large fund movements related to trade transactions automatically and proactively.
  • Adopting advanced tools in collaboration with human oversight to identify risky transactions efficiently.
  • Collaboration and information sharing with other institutions, regulatory bodies, and law enforcement agencies to strengthen collective efforts.

Unfortunately the criminal networks of today are very creative and sophisticated, however with the above measures in place organisations will fortify their defences against TBML, contribute to global efforts against financial crimes, and maintain the integrity of the international financial system. Collaboration, vigilance, and adopting advanced technologies are key to staying ahead of evolving money laundering tactics in international trade.

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