Trade-based money laundering is defined as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins. Criminals use sophisticated tools and techniques to conceal the origin of the dirty money thereby abusing the financial crime compliance sector. Though over pricing, under pricing, ghost shipping are some of the common tools under trade based money laundering, several other money laundering techniques are also deployed so as to obscure the audit trial.
Trade based money laundering is an important channel for criminals. Laundromats take advantage of the complex nature of the international trade system and the process flow. The authorities of the trade finance sector have witnessed enormous challenges in detecting, monitoring and preventing the trade based money laundering. Developing countries are highly vulnerable where trade based money laundering facilitates the modern day slavery –human trafficking.
AUSTRAC collaborates with fintel alliance in combating trade based money laundering and was able to share intelligence with concerned law enforcement authorities where AUSTRAC witnessed a steep rise of 643% increase in suspicious matter reports (SMR) with regard to child sexual exploitation. Also, this resulted in not only the arrest of 73 persons but also around 35 victims were rescued.
As trade based money laundering is carried out across jurisdictions by the criminals (as organised crime) it is critical for the law enforcement agencies, policy making bodies and regulators to collaborate with one another to fight for their common objective. Improved operations, timely sharing of quality information supported by sophisticated technologies are the factors enhancing the outcome of financial crime compliance.
Author: Rajashree, MBA, CAMI
(PonSun AML Academy)