Page 32 - Banking Finance June 2025

ARTICLE

Tackling Trade-

Based Money

Laundering in the

Modern Financial Partha Sarathi Nayak

Chief Manager, Faculty
Landscape Union Learning Academy,
Union Bank of India

Hyderabad

If we inquire informally among a group of bankers about familiarity with terms like a Letter of Credit
(L/C), Bill of entry (BoE), or Buyer's Credit, only a few might possess this knowledge. This introduces
us to the intricate world of trade finance-a realm filled with unique terminologies and practices,
characterized by its complexity and specialization.

I f we inquire informally among a group of bankers about laundering schemes to disguise the origin and destination
of their illicit proceeds and integrate their assets in legiti-
familiarity with terms like a Letter of Credit (L/C), Bill
of entry (BoE), or Buyer's Credit, only a few might pos-
sess this knowledge. This introduces us to the intricate world mate financial entities.
of trade finance-a realm filled with unique terminologies and Black Market Peso Exchange, a well-known TBML scheme
practices, characterized by its complexity and specialization. involves merchants who-wittingly or not-accept payment in
It involves numerous parties, including intermediaries, illicitly derived funds, often from third parties to a trade
banks, and a vast array of goods, commodities, and services transaction, for exports of goods. Various observers have
that are part of the countless trade transactions banks pro- noted that although TBML is a common form of international
cess every day. The combination of escalating regulatory de- money laundering, it is also one of the least understood and
mands and the inherent complexity of trade has placed most difficult to detect because of its complexity.
bankers in a challenging position. This article provides a
comprehensive analysis of trade-based money laundering TBML schemes can also involve misrepresenting the price,
(TBML), delving into its mechanisms, implications, and quantity, or type of goods or services in trade transactions.
counter measures. In misrepresentation schemes, the parties involved in the
trade transaction may under or over invoice goods or ser-
TBML involves the exploitation of international trade trans- vices; issue multiple invoices for the same goods or services;
actions to transfer value and obscure the origins of illicit provide goods or services than the declared amount, includ-
proceeds. While international trade promotes economic ing in some cases providing no goods or services; or falsely
growth around the world, international trade transactions describe the types of goods or services provided. Through
face a range of risks and are vulnerable to abuse by crimi- these types of misrepresentation, value can be transferred
nal and terrorist organizations. Transnational criminal orga- from one party to another, and the illicit origins of criminal
nizations and terrorist organizations use a variety of money proceeds obscured.

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