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Major report published on US efforts to counter TBML

By Mark Ford on February 3, 2020

The US Government Accountability Office (GAO) has released a detailed report that examines US agencies’ efforts to combat trade-based money laundering (TBML).

Countering Illicit Finance And Trade: US Efforts to Combat Trade-Based Money Laundering identifies TBML-related vulnerabilities in the US financial and trade systems, and the types of criminal organisations that seek to exploit those vulnerabilities.

GAO’s findings

The GAO found that US financial and trade systems have vulnerabilities that criminal organisations seek to exploit.

While financial institutions are required to report suspicious financial transactions to the authorities, they have limited visibility into the underlying documentation of the majority of trade transactions for which they process the payments, which makes it more difficult for them to identify suspicious activity.

Primary vulnerabilities

The report says one of the primary vulnerabilities of the US financial and trade systems is open-account trade, in which the trade transaction is not financed by a bank.

In open-account trade, the financial transaction between the buyer and seller that underpins the trade transaction is usually processed through a bank’s automatic payment systems, without human intervention, by the bank sending the payment on behalf of its customer.

This means the bank has limited visibility into the underlying activity generating the payment according to the report.

Complexity and organised crime

The report says the large volume and complexities of international trade transactions, as well as the limited resources and varying priorities of customs agencies to identify and investigate illicit trade, make the US financial and trade systems attractive for illicit activity, including TBML and related schemes.

US law enforcement officials that GAO interviewed said that the types of organisations using TBML schemes are primarily transnational criminal organisations involved in narcotics trafficking, customs fraud, and financial fraud schemes, as well as professional money launderers and terrorist organisations.

Countering Illicit Finance And Trade: US Efforts to Combat Trade-Based Money Laundering can be found here.