Banks involved in international trade transactions need to be more alert to illicit trading in the UK’s eight new freeports that are due to enter operation in late 2021 according to a new study from the University of Portsmouth.
It highlights the potential for trade-based money laundering (TBML) at freeports and says stronger regulation is needed to prevent them being abused for money-laundering and tax-evasion purposes.
Banks and TBML concerns
The study suggests that banks that facilitate numerous international trade transactions need to be more alert to illicit trading and should be responsible for carrying out proper due diligence around freeport trade.
Report lead author Paul Gilmour, from the university’s Institute of Criminal Justice Studies, says there is “evidence that these zones enable trade-based money laundering by the falsifying of trade invoices to deceive authorities.”
“The many international transactions occurring through freeports, coupled with a lack of regulatory supervision, poses notable challenges for government officials,” he concludes.
Pros and cons
The study demonstrates the attractive trading advantages offered by freeports to enable enterprise and innovation, which are hoped to drive investment, economic opportunities and growth to those regions.
But the study reveals that the secretive offshore space in which freeports operate also helps to obscure beneficial ownership and illicit trade-based practices that frustrate authorities’ efforts to trace laundered monies and recover government taxes.
Despite freeports’ trade offerings, stronger regulation is needed to prevent them from being abused for money-laundering and tax-evasion purposes the study, published in the Journal of Money Laundering Control, concludes.
The Journal of Money Laundering Control web site can be found here.
Categories: Trade Based Financial crimes News