Page 37 - Banking Finance April 2018

ARTICLE

to earn, move and store proceeds disguised as or service below market value, an exporter can shift
legitimate trade. Criminal organizations frequently funds to the importer very easily, as the payment to the
exploit global trade system to move value around the exporter is less than the value that the importer
world by employing complex and even sometimes receives when the goods are sold at market value.
confusing documentation associated with legitimate Similarly, by invoicing a good or service at a higher rate
trade transactions. In particular terrorist financiers take than the market value, the exporter transfers the value
advantage of the size / complexity of the international from the importer because the payment to the exporter
trade and finance system to obscure individual is greater than the value the importer receives when
transactions through : the goods or service are sold at the market value.
O The complexities involved with multiple foreign
exchange transactions and diverse trade financing
arrangements,

O The co-mingling of legitimate and illicit funds, and
O The limited resources that most customs agencies
have to detect suspicious trade transactions.
Practically most of the customs agencies inspect
less than five percent of all cargo shipments
entering or leaving their jurisdiction.

In addition, money launderers have exploited vulnerabilities
in the use of letter of credit and other financial
arrangements that are necessary for facilitating cross border
These types of transactions generally require collusion by
trade to launder funds. TBML techniques vary in complexity
both parties and can have significant tax implications. Also,
and are frequently used in combination with other money complex products and products that travel through supply
laundering techniques to further obscure the money trail.
chains are more apt to be used in these types of over and
under-invoicing activities because they complicate the ability
The crime involves a number of schemes in order to
of customs officials to determine the true market value of
complicate the documentation of legitimate trade
such goods and services.
transaction, such actions may include moving illicit goods,
falsifying documents, misrepresenting financial transactions
Under invoicing of exports is one of the most common trade-
and under or over invoicing the value of the goods / services. based money laundering techniques used to move money.
In most cases, TBML activities comprise of efforts to
It reflects the fact that the primary focus of most customs
misrepresent the price, quantity or quality of goods, as they
agencies is to stop the importation of contraband and
transit across borders or through supply chains. It is one of ensure that appropriate import duties are collected, which
the most sophisticated methods of money laundering
is one of the major revenue generators to the economy.
through which hundreds of billions of dollars laundered every
Thus, customs agencies generally monitor exports less
year. TBML activity is considered to be growing in both
rigorously than importes.
volume and global reach.
Most of the customs agencies do not have access to data
Some of the basic techniques used in Trade Based to establish 'fair price' of most the products. Moreover they
Money Laundering are : see only one side of the transactions, as most of the customs
Y Over and under-invoicing of goods and services : Money agencies do not share trade data with other countries. As
laundering through over and under-invoicing of goods such, their ability to identify incorrectly priced goods is often
and services is one of the most commonly used methods limited to those that are widely traded and whose prices
for laundering funds across borders. By invoicing a good are widely quoted in the international markets.

BANKING FINANCE | APRIL | 2018 | 37