FATF releases landmark report on trade-based money laundering

Vigilance amongst competent authorities, private sector institutions, and other participants in global supply chains is called for in a landmark new report on trade-based money laundering (TBML) published by the Financial Action Task Force (FATF).

Produced in collaboration with the Egmont Group of Financial Intelligence Units, Trade-Based Money Laundering: Trends and Developments calls for a better understanding of both old and new TBML typologies, more data sharing, and collaboration amongst those concerned with detecting and countering this increasingly complex type of money laundering.

Understanding trade processes

FATF’s latest report has a new focus on trade-based terrorist financing (TBTF). It underlines that international trade networks can attract both criminals and terrorists financiers who exploit interconnected supply chains and that there can be a lack of understanding of how these illegal financiers work.

It also says that exploitation of trade financing processes was a common theme noted by private sector contributors while public sector bodies need to deepen their understanding of these processes.

Greater awareness about all aspects of the trade process, including how different financing processes are managed, would likely increase opportunities to detect and successfully disrupt TBML/TF the report concludes.

Old and new typologies

Despite the growth in technology-enabled payment methods, case studies in the report continue to highlight the reliance on Black Market Peso Exchange (BMPE) schemes in many TBML operations.

The report also contemplates other forms of illicit cash integration, such as the exploitation of surrogate shopping where the ‘shopper’ acts on behalf of wealthy individuals, who might for example face restrictions in purchasing higher-value goods because of stringent currency controls. It also looks at typologies that infiltrate legitimate supply chains.

Newer challenges highlighted in the report include the growth in online businesses, restricted scope for proactive compliance activity, and new technologies and the digitalisation of trade processes increasing the speed of trade operations.

Risk-based approach

This latest report reinforces FATF’s introduction of a risk-based approach to global anti-money laundering and counter-terrorist financing in 2012, which the task force says may be the most fundamental revision to the FATF Standards in recent years.

It underlines the importance of a National Risk Assessment (NRA) in this type of approach and provides several NRA case studies.

Accessible toolkit

The report aims to present complex issues in an accessible, easy-to-understand way.

It provides a toolkit of ideas and initiatives that have delivered impact in combatting TBML and TBTF schemes and aims to be relevant to countries with already well-developed as well as less-developed systems and processes to identify and disrupt these types of trade-based financial crimes.

FATF’s Trade-Based Money Laundering: Trends and Developments report can be found here.



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