EXECUTIVE SUMMARY
- Trade Based Money Laundering (TBML) was recognized by the Financial Action Task Force (FATF) in its landmark 2006 study as one of the three main methods by which criminal organizations and terrorist financiers move money for the purpose of disguising its origins and integrating it back into the formal economy. This method of money laundering (ML) is based upon abuse of trade transactions and their financing. The 2006 FATF Study highlighted the increasing attractiveness of TBML as a method for laundering funds, as controls on laundering of funds through misuse of the financial system (both formal and alternate) and through physical movement of cash (cash smuggling) become tighter.
- In recent years APG members have continued to highlight vulnerabilities for TBML, but very few cases investigations or prosecutions appear to have been undertaken in the Asia/Pacific region and very few case studies had been shared.
- The APG’s TBML study aims to build on the existing studies, in particular those of the FATF, in order to study the extent of the prevalence of TBML and highlight current methods, techniques and modus operandi for TBML as well as to identify ‘red flags’ to detect and respond to TBML.
- In determining the magnitude of TBML, the study considered why so few cases of TBML have been detected since the FATF’s 2006 study. The Paper has sought to clarify and furnish explanations for terms and processes of ‘trade finance’ which are comprehensible to Money Laundering (ML) investigators.
- This Paper has focused on TBML occurring in the course of international trade in goods. The study does not include in its scope capital flight, tax evasion, trade in services and domestic trade. The features of the dynamic environment that distinguish TBML from other forms of ML are its occurrence through intermingling of the trade sector with the trade finance sector in cross- border transactions. The foreign exchange market and the long supply chain make international trade particularly vulnerable to TBML.
- The study included circulation of a questionnaire to APG and FATF members seeking statistically significant indicators. The Paper sets out a number of Case Studies to illustrate trends of TBML. Simplified explanations of the terms and processes of trade finance have been attempted through interaction with the private sector. A brief review of the literature on the subject generated by the FATF, FSRBs and other authors has been made.
- There is a growing concern on how the rapid growth in the global economy has made international trade an increasingly attractive avenue to move illicit funds through financial transactions associated with the trade in goods and services. TBML is a complex phenomenon since its constituent elements cut across not only sectoral boundaries but also national borders. The dynamic environment of international trade allows TBML to take multiple forms.
Detailed report link from APG: click here