Page 38 - Banking Finance April 2018

ARTICLE

Y Multiple invoicing of goods and services : By providing from Latin America, called the Black Market Peso Exchange,
multiple invoices for the same transaction, a money where the Colombian drug traffickers used sophisticated
launderer or a terrorist financier can justify multiple trade based schemes to disguise huge amount in narcotics.
payments for the same goods or services. In addition,
by using a number of financial institutions to make these TBML is widely recognized as the most common
multiple payments, a money launderer or terrorist manifestation of international money laundering as well as
financier can increase the level of complexity of the a known value transfer and reconciliation method used by
transactions and complicate efforts at detection. If the terrorist organizations, but, it appears to be less understood
transaction is detected, a launderer can offer a number among academics and policymakers than traditional forms
of plausible explanations that compound efforts by of money laundering through the international banking
officials to detect the activity. system and bulk cash smuggling. TBML can have a more
destructive impact on legitimate commerce than other
Y Over and under-shipment of goods and services : In money laundering schemes.
addition to manipulating the prices of goods and
services, a money launderer can misstate the quantity Multinational criminal organizations may dump imported
of goods and services that are exported or imported. goods purchased with illicit proceeds at a discount, into a
In the extreme, exporters and importers can collude in market just to expedite the money laundering process, but
not shipping any goods at all but proceed with it puts legitimate businesses at a competitive disadvantage.
processing the necessary shipping and customs This activity can create a barrier to entrepreneurship,
documents. Banks and other financial institutions will crowding out legitimate economic activity. TBML also robs
not be aware that these phantom transactions are governments of tax revenue due to the sale of underpriced
occurring. goods and reduced duties collected on undervalued imports
and fraudulent cargo manifests. TBML has emerged as an
Y Falsely described goods and services : Money issue of growing concern to the regulators.
launderers also can misstate the quality or the type of
goods or service that is being traded. Such a mis- TBML red flags are among the hardest to detect, which is
statement creates a discrepancy between the value of challenge to the Compliance officers to stay current on
a good that is stated in the shipment or customs forms emerging schemes and updated AML technology to detect
and what is actually shipped. and prevent criminal activity.

For decades, US dollar has been the most popular currency
Combining several of these common TBML techniques is a
for launderers, due to its popularity / wide acceptance and
classic scheme involving the laundering of drug proceeds
the volume of worldwide transactions that use the currency
- a few million extra dollars changing hands does not attract
attention. However, euro has slowly gained a foothold in the
laundering industry since its introduction as common
currency by the European union.

Combating
The scale of money laundering is difficult to assess, but it is
considered to be significant. The United Nations Office on
Drugs and Crime estimates that between 2% to 5% of Global
GDP is laundered every year. Overall, it will be impossible
to estimate the amount of money being laundered. Every
year Billions of dollars are laundered, which is a great
concern for all.

38 | 2018 | APRIL | BANKING FINANCE