More scrutiny of Special Economic Zones is needed to clamp down on TBML

A fellow at a Washington based think tank is calling on the government agency responsible for developing and recommending policy to US President Trump to scrutinise the role of the world’s Special Economic Zones (SEZs) in trade-based money laundering (TBML).

Clay Fuller says that efforts by the office of the United States Trade Representative to clamp down on TBML at SEZs will exponentially curb future losses from illicit financial flows.

Non-democratic states

Fuller argues that free market enclaves such as SEZs provide lower taxes, regulation, and oversight than the rest of a country and in free societies with open economies the zones encourage more firms to grow.

But in non-democratic states with closed economies, the Jeane Kirkpatrick fellow at the American Enterprise Institute says SEZs both concentrate economic power in large firms (often overtly or covertly state-connected) and dramatically increase the value of trade in two ways.

The first of these is TBML according to Fuller, who reckons this is the most widespread, fastest growing, and difficult to detect form of money laundering used by dictators, transnational criminal networks and terrorist financiers. The second is intellectual property theft from SEZs.

Streamlined TBML

TBML typologies such as over- and under-invoicing or shipping, multiple invoicing, and falsely labelled trans-shipments all become easier in the streamlined, unregulated, and complex transactional nature of SEZs, Fuller maintains.

He concedes that US Immigration and Customs Enforcement currently investigates TBML through its Trade Transparency Units, but concludes that they are severely underfunded given the scope of the problem.

Categories: Trade Based Financial crimes News

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