Trade-based money laundering: organized crime, learning and international trade

Abstract

Purpose The purpose of this paper is to examine the link between trade-based money laundering and organized crime. Trade-based money laundering (TBML) has emerged as the newest and possibly most complex method used by organized crime and white-collar crime groups for illegally laundering money in the international financial system. Using legitimate global trade streams, criminal organizations are able to transfer billions of dollars annually between jurisdictions without having to adhere to state-level currency regulations. Design/methodology/approach Using a rational approach to understanding the behavior of criminal organizations, it is argued that TBML will continue to grow as a preferred methodology for laundering money internationally. As criminal organizations continue to be displaced from the more traditional methods of money laundering, they will look for and find TBML as a viable alternative for moving money between different jurisdictions. Findings As the methodology becomes more developed, the skill set will transfer to an increasing number of organized crime groups and be incorporated as a mainstream method for laundering and moving money. Practical implications To stay current with contemporary money laundering schemes, law enforcement agencies will have to train their investigators to spot, investigate and collect requisite evidence for successful prosecution and disruption of TBML offences. Moreover, in the absence of a global regime for sharing trade and customs information, legislators and law enforcement agencies will have to consider how to best expedite the sharing of trade and customs information. Originality/value This is the only study to address TBML as an emerging money laundering technique and the transfer of the skill between organized crime groups. It further details the skills that police investigators needs to develop to successfully combat TBML.

Uncovering the depths of trade-based money laundering: evidence from a seaport in Bangladesh

“…These individuals are always trying to stay ahead of regulators and invent new techniques to avoid detection (Teichmann, 2020), leading to an expanding focus on TBML regulations (Ferwerda et al , 2013). This is a never-ending process, as closing one gate through expanded detection will automatically open up another (Hataley, 2020; McSkimming, 2010). Therefore, researchers have also focussed on exploring new ML dimensions in the trade sector.…”

“…The study also found that TBML is often linked to other forms of financial crime, such as financing terrorism and drug trafficking. Another study found that TBML can have significant economic and social impacts, such as reducing tax revenues, distorting trade patterns and undermining the competitiveness of legitimate businesses (Hataley, 2020; Naheem, 2019). Another study looked at the impact of TBML on the global financial system and found that it can lead to significant financial losses for governments and businesses and contribute to economic instability and corruption (Naheem, 2018).…”

“…The sheer volume and complexity of international trade make it difficult to oversee and monitor all transactions, providing enough possibilities for criminals to exploit systemic flaws (Cassara, 2016). A subset of money laundering (ML) known as trade-based ML (TBML) involves criminals using legitimate international trade to mask the true nature and location of illicit fund (Choi, 2019; Hataley, 2020). It is a complex and sophisticated financial crime that may involve multiple stakeholders, including importers, exporters, customs brokers, shipping companies and financial institutions.…”

Beyond Banks: A Case for Interagency Collaboration to Combat Trade-based Money Laundering in Africa

“…Businesses also use cash in advance payments or black-market peso exchanges (BMPEs) amongst other techniques. 22 BMPEs were originally used by drug cartels to circumvent traditional banking institutions and some brokers who facilitated laundering were middlemen in such transactions. Such brokers usually have various accounts, in different currencies, across different jurisdictions.…”

Financial crime scripting: Introducing a financial perspective to the Dutch cocaine trade

“…It has been calculated that for cryptocurrency around 50 percent of the yearly bitcoin transactions are related to illegal activities (Foley et al, 2019). When it comes to TBML, the payment method and money laundering scheme is considered to be a growth industry for organized crime groups (Hataley, 2020). For example, organized crime groups can use the lack of regulatory supervision in freeports to manipulate trade invoices of shipments (Gilmour, 2021).…”