Trillions of dollars missing from US government coffers due to trade-based money laundering

Trillions of dollars may be missing from US government coffers due to widespread corporate tax evasion and criminal money laundering strategies according to a recent study.

Florida International University professor John Zdanowicz conducted an analysis of 12 years’ worth of customs data and found that mis-invoicing of goods imported and exported by US companies is masking complex tax avoidance strategies.

Massive losses

The strategies have cost the US government more than US$2.3 trillion in revenue from 2003 to 2014 according to Zdanowicz.

“Criminals and tax evaders have discovered that laundering money through the banking system is dangerous, especially with the new financial institution reporting requirements under the Patriot Act and other banking regulations,” Zdanowicz said.

“However, moving money through international trade can be virtually undetectable,” he added.

Growing problem

Zdanowicz, a noted international expert on money laundering and fraud, found that money moved out of the US through mis-invoicing in international trade grew from $168.31 billion in 2003 to $230.58 billion in 2014, a more than 30 per cent increase.

Examples of mis-invoicing found by the professor include the sale of prefabricated metal buildings to Vietnam for US$50.78; unworked diamonds imported from Botswana for US$4,878.33 per carat; vitamin E imported from Ireland for $30,334.36 per kilogram and Chinese brooms imported for US$61.37 each.

Country risks

China tops the list of countries with which US entities enter into illicit trade-based transactions.

Other countries involved in trade-based crime with the US include Canada, Mexico, Japan and Germany.

A copy of the executive summary of the report by Zdanowicz can be found here.



Categories: Trade Based Financial crimes News