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More information sharing and collaboration needed to combat TBML says major new US government report

By Mark Ford on December 15, 2021

Better information sharing and collaboration is needed to combat trade-based money laundering (TBML) according to a substantial report released on Monday by the US Government Accountability Office (GAOs).

Countering Illicit Finance and Trade concluded that TBML is one of the primary mechanisms criminal organisations and others use to launder illicit proceeds, and for most trade transactions, financial institutions lack the tools to identify suspicious activity.

The report has been welcomed by republican senator Bill Cassidy and democratic senator Sheldon Whitehouse who requested the report in 2018 as part of their ongoing effort to combat TBML but the department of homeland security (DHS) has expressed concerns about it.

Scope and recommendations

The report includes examination of vulnerabilities in the US financial and trade systems that are exploited to facilitate TBML; the data US agencies use to detect and combat TBML, and the extent to which agencies collaborate to share information to combat TBML.

The GAO recommends in the report that the treasury department establishes an interagency mechanism to promote greater information sharing and data analysis.

It also recommends that the DHS should take steps to allow the sharing of data held by its trade transparency unit (TTU), which was established specifically to combat TBML, with relevant agencies.

Suspicious activity data siloed

The report found that current federal collaborative efforts to combat TBML do not include some key agencies involved in overseeing trade while information on suspicious financial and trade activity is siloed among different agencies.

The treasury’s national strategy for combating money laundering for example does not incorporate the views and perspectives of several agencies positioned to identify illicit trade, as well as private-sector entities, such as freight forwarders.

No formal anti-TBML collaboration

There is no formal collaboration mechanism focused on combating TBML, such as a working group or task force, among federal agencies with anti-money laundering and trade enforcement responsibilities.

Such a mechanism could facilitate the sharing of information and data on trade-facilitated financial crimes between federal agencies and with private-sector entities the report concluded.

Lack of proactivity

The TTU uses the Data Analysis and Research for Trade Transparency System (DARTTS) to analyse trade and financial data to identify suspicious transactions that may warrant investigation for money laundering or other crimes.

The report says data from this system are not proactively analysed to identify emerging trends or patterns of illicit activity and are not shared with other relevant agencies involved in combating illicit finance and trade that could potentially identify suspicious activity.

TTU officials told GAO that data-sharing agreements with partner countries limit its ability to share DARTTS data, but the report found that with access to relevant data, US agencies may be able to better identify emerging risks and trends related to TBML and other illicit trade schemes.

DHS resistance

The DHS says that its Immigration and Customs Enforcement leadership is concerned with the GAO’s findings that the TTU should expand data sharing with the private sector.

The GAO however says that the DHS has misread the report and that data sharing with the private sector was not part of its findings or recommendations, which the agency says are specifically focused on data sharing between US agencies with roles and responsibilities related to enforcing trade laws and combating illicit financial activity

A synopsis of Countering Illicit Finance and Trade and links to various versions of the report can be found here.

A full version of Countering Illicit Finance and Trade can be found here.

A press release welcoming the report issued by senators Cassidy and Whitehouse and colleagues can be found here.