Accuity, a provider of payment efficiency and compliance solutions, including anti-money laundering and counter terrorist financing, is highlighting the risk of letters of credit (L/C) being used by money launderers.
According to Henry Balani, Accuity’s head of innovation with responsibility for introducing new know-your-customer (KYC) solutions, criminals are becoming more sophisticated in their methods of moving illicit money, and they see trade as an opportunity.
How it works
Balani explains that the principal method by which criminals launder money is through value transfer of goods traded.
For example, if drug traffickers in Mexico want to launder money from drugs sold in the US, they would consider entering a trade transaction by raising an L/C opened by a fictitious import company in the US.
It would appear to buy goods from an exporter in Mexico and pay higher than normal prices.
The trade documents would reflect the value of the goods being shipped while the importer would pay for the inflated goods through a bank to the seller in Mexico.
This seller could also be a front company based in Mexico, suggests Balani, who says the seller in Mexico would then receive the funds through a local bank.
From the bank’s perspective, the transaction would appear sound, since the documents would be correct, but the value of the goods would be misrepresented, resulting in the illicit transfer of money through the trade.
A full version of Balani’s article can be found here.
Categories: Trade Based Financial crimes News