Trade-based Money Laundering
The international trade system is rather vulnerable and, therefore, it can be exploited by criminal organizations and terrorist financiers. Criminals often find loopholes to launder the proceeds of crime and obtain funding to terrorists not being detected.
The international trade system seems very attractive to money-launderers because of many reasons. Enormous ever-growing volume of international trade, limited resources for detection at a disposal of many customs agencies and complex multiple foreign exchange transactions are just some of the above-mentioned factors of attractiveness. To add, nearly all economies have become more open to trade in last decade.
Trade-based money laundering is usually defined as the process of covering the proceeds of crime and moving value using trade transactions in order to legitimise their illegal nature.
Trade-based money laundering can be carried out by means of the mispresentation of the price, quality or quantity of goods and services. The basic techniques of trade-based money laundering are as follows:
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over- and under-invoicing of goods and services;
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over- and under-shipments of goods and services;
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multiple invoicing of goods and services;
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falsely described goods and services.
However, in practice, the basic techniques of trade-based money laundering are used not so often – usually money launderers use combinations of several basic techniques to develop a complex trade-based money laundering techniques. The examples of complex trade-based money laundering can be provided by almost any black market with numerous and complex criminal operations.