Trade misinvoicing is possibly the most pervasive form of Chinese money laundering according to a new report published by Global Financial Integrity (GFI) which concludes that China plays an extremely impactful role as a source, transit and demand country in many of the most widespread and serious transnational crimes.
China’s Role in Transnational Crime and Illicit Financial Flows also alleges the country is unique in that the government itself engages in certain types of criminal activity, notably in forced labour and intellectual property rights violations but also with the involvement of the Chinese authorities in a trade-based money laundering (TBML) scheme.
Invoice and customs fraud
Most forms of trade misinvoicing related to China revolve around invoice fraud and manipulation according to the report which says that sometimes this is done to facilitate simple customs fraud, for example to minimise the payment of taxes and duties.
Customs fraud meanwhile is the most prevalent predicate offence in TBML schemes yet it is often overlooked because worldwide customs authorities generally do not have an investigative mandate according to the Washington-based non-profit focused on illicit financial flows.
The report says invoice fraud is also sometimes part of value transfer or sending of trade goods instead of fund payment transfers from one country or jurisdiction to another. Often this facilitates capital flight.
For money launderers, transferring value via trade goods is particularly attractive because it generally does not trigger financial transparency reporting requirements according to GFI, which says trade-based value transfer is not closely examined by law enforcement and customs services.
The report cites a major multi-billion-euro TBML investigation in Italy where Chinese authorities were found to have actively obstructed justice.
In Spain, China’s largest bank is accused of facilitating some of the laundering schemes run by Chinese criminal organisations says the report.
The report, China’s Role in Transnational Crime and Illicit Financial Flows, can be downloaded from here.
Categories: Trade Based Financial crimes News