Global Financial Integrity (GFI) has published an analysis of trade misinvoicing in Mexico and Colombia where individuals or entities falsify the quantity, price, and quality of goods to launder money, claim tax incentives, or evade taxes, duties and capital controls.
Corruption, lack of political will, and ineffective customs infrastructure are some of the factors that hinder anti-money laundering and counter financing of terrorism (AML/CFT) efforts related to trade misinvoicing according to GFI’s analysis, Seeking Solutions to Trade Misinvoicing in Mexico and Colombia.
Aided by corruption
Drug cartels in Mexico and Colombia frequently use low-risk, high-reward methods such as misinvoicing in their trade-based money laundering (TBML) operations according to the analysis.
Aided by corrupt officials, businesses, and private sector employees, GFI says the cartels have been able to expand their presence at crucial geopolitical points such as ports, airports, and border crossings, thus facilitating trade misinvoicing as well as smuggling.
Focus on customs
The analysis looks at AML/CFT legislation in both countries and highlights weaknesses in their regulatory frameworks.
Because corruption can play an important role in trade misinvoicing and other TBML-related schemes, GFI suggests both countries should improve anti-corruption laws and penalties against any involved actors and prioritise efforts to address corruption at customs agencies.
Countries should also consider studying the relationship between corruption and the sectors and industries with larger import and export value gaps according to the analysis.
It concludes that both countries should implement trade misinvoicing tools. A risk assessment tool that provides real-time price comparisons would enable the authorities to compare reported prices to average prices as reported by the trade partner country, so discrepancies requiring further scrutiny should be indentifiable.
GFI’s analysis, Seeking Solutions to Trade Misinvoicing in Mexico and Colombia can be found here.
Categories: Trade Based Financial crimes News