China’s role in global trade-based financial crime

A former US intelligence officer argues in a comprehensive article that trade misinvoicing or other forms of trade-based money laundering (TBML) are now the most pervasive forms of Chinese money-laundering.

John Cassara says a simple but effective means of moving value out of China is by importing goods at overvalued prices or exporting goods at undervalued prices, and this type of trading is now extensively coupled with the Black Market Peso Exchange (BMPE).

Latin connections

The BMPE is one of the largest money-laundering methodologies responsible for laundering billions of dollars of drug proceeds every year, and commonly used by both Colombian and Mexican drug cartels.

In the BMPE, drug proceeds are used to purchase trade items such as electronics, garments and toys.  Historically these goods were purchased in the US and sent by the black market dealers to Colombia or Mexico.

China’s new role

Today, Cassara says drug money is increasingly used to purchase Chinese merchandise either directly from China or via US importers.

In some quarters the technique has expanded, with cheap manufactured Chinese goods imported at overvalued prices so that criminally derived money is channelled directly out of a country, sometimes even avoiding currency controls.

European involvement

Europe has been hard-hit by another version of Chinese TBML. Warehouses in Italy, Poland and Spain in particular are filled with consumer goods such as tools, paper products, electronics and kitchen supplies.

Only a fraction of each shipment is declared by importers who work on the assumption that trade volumes in these goods are so high that customs officials are only able to physically inspect a very small percentage of imports.

The under-valued goods are sold and the proceeds are often laundered back to China according to Cassara who reckons proceeds rarely stay in the European host country.

John Cassara’s article, China, Inc. Is the World’s Biggest Money-Laundering Threat can be found here.

Categories: Trade Based Financial crimes News

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