A new report from the US Congressional Research Service highlights the prevalence of trade-based money laundering (TBML) and outlines some of the ways the US is seeking to curtail these illicit financial flows.

The report, Trade-Based Money Laundering: Overview and Policy Issues, explains how TBML schemes vary in complexity but typically involve misrepresentation of the price, quantity, or quality of imports or exports.

Trade finance

Financial institutions may wittingly or unwittingly be implicated in TBML schemes when such institutions are used to settle, facilitate, or finance international trade transactions according to the report.

It points out that wire transfers and trade finance, notably letters of credit and guarantees are all used in TBML operations.

Growing threat

The report also reckons that TBML activity is considered to be growing in both volume and global reach.

Though widely recognised as one of the most common manifestations of international money laundering, TBML appears to be less understood among academics and policymakers than traditional forms of money laundering through the international banking system and bulk cash smuggling.

Nevertheless, TBML has emerged as an issue of growing interest in Congress, especially as members and committees examine tools to counter terrorist financing.

Refocus needed

The US government has historically focused on TBML schemes involving drug proceeds from Latin America, particularly the Black Market Peso Exchange (BMPE).

Now it appears that TBML is used by known terrorist groups and other non-state armed groups, including Hezbollah, even though the Treasury Department’s June 2015 National Terrorist Financing Risk Assessment concluded that TBML is not a dominant method for terrorist financing.

This means the authorities should consider refocusing efforts to identify and curtail TBML the report suggests.

The full report, Trade-Based Money Laundering: Overview and Policy Issues, can be found here.

Categories: Trade Based Financial crimes News