Summary

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls. Review by Toni Männistö (CBRA)

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Full review

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls.

The new methods for cross-border money laundering and tax evasion concern most CORE demonstrations, especially those involving international cargo movements. The emerging risk of trade-based money laundering calls for new and more effective enforcement of trade transactions. CORE is developing new solutions (e.g., data pipeline and system-based supervision) for capturing and sharing trade information across logistics operators and law enforcement agencies. The new solutions likely improve law enforcement’s capability to detect suspicious trade transactions that may have something to do with the trade-based money laundering. However, building such capability requires IT integration (e.g., interoperability), risk awareness and education and training. CORE consortium addresses these complementary activities in work carried out in risk, IT and educational clusters.

Reference

Trade and money laundering uncontained, the Economist, May 3^rd 2014

CORE2006

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