Everything You Need to Know About Trade Based Money Laundering (TBML)

Trade based money laundering (TBML) is a form of money laundering where criminals undergo the process of disguising the proceeds of crime by moving money using trade transactions to legitimize their illicit origins. TBML schemes vary in complexity but typically involve misrepresentation of the price, quantity, or quality of imports or exports.

The international trade system is subject to a wide range of risks that can be exploited by criminal organizations. These vulnerabilities come from various sources, including: 

• The enormous volume of trade flows, which obscures individual transactions;
• The complexities associated with the use of multiple foreign exchange transactions and diverse trade financing arrangements 
• The commingling of legitimate and illicit funds
• The limited resources that most customs agencies have available to detect suspicious trade transactions

>> Discover a real world example of uncovering TBML risk in Paraguay using public data <<

The most common TBML methods include:

• Over-invoicing: The exporter submits an inflated invoice to the importer, generating a payment that exceeds the value of the shipped goods. The remaining value is transferred from the importer to the exporter. 
• Under-invoicing: The exporter submits a deflated invoice to the importer, shipping goods with greater value and transferring that value to the importer.  
• Multiple-invoicing: The exporter invoices multiple times for the same shipment, transferring greater value from the importer to the exporter.
• Over- or under-shipment: The exporter ships more goods than previously agreed with the importer, thereby transferring greater value to the importer. Alternatively, the exporter ships fewer goods than agreed, transferring greater value to the exporter.
• Misrepresentation of quality: Goods shipped to importers are misrepresented on official documentation as being of a higher quality — thereby transferring greater value to the exporter.

These methods of misrepresenting the value of goods help nefarious importers and exporters disguise their illicit funds by participating in seemingly legitimate trade transactions.

Trade based money laundering is important because criminals turn to money laundering to conceal a number of crimes, ranging from small-scale tax evasion and fraud to larger-scale corruption, terrorist financing, and drug trafficking. A study by the US Government Accountability Office (GAO) found ties from trade-facilitated criminal activity to other crimes such as customs fraud, trafficking in counterfeit goods, or tax evasion.

>> Everything you need to know about anti-money laundering <<

TBML is not only one of the most used, but also one of the most difficult to detect methods of money laundering, according to a report by the US Treasury Department. This is because criminal organizations utilize TBML to disguise the origin of criminal proceeds by integrating it into the formal economy through trade transactions.

The Financial Action Task Force (FATF) has previously focused its efforts on uncovering money laundering that occurred through other methods including on combating the crime through other methods, including the use of the financial system and the physical movement of money through cash couriers. In recent years, their focus shifted given the growth of world trade, an increasingly important money laundering and terrorist financing vulnerability. FATF concluded that TBML can be expected to become an increasingly attractive vehicle for money launderers.

Whether you’re working for a financial institution looking to meet compliance requirements or you’re a government investigator tracking down illicit actors, information is the key to success with uncovering TBML. 

>> Watch a Masterclass on uncovering TBML risk in Latin America and the US <<

A commercial risk intelligence platform, such as Sayari Graph, leverages global public records enriched with trade data and graph technology to pre-compute complex, cross-border corporate networks, thus providing a clear picture of illicit financial actors, their infrastructure, and relationships. This comprehensive view provides importers with broader context surrounding their partners and counterparties. 

With the addition of global trade and maritime data into the Sayari data library, regulators and multinationals now have greater insight into the flow of goods through key international markets, empowering not only TBML investigations, but additionally trade compliance, sanctions investigations, and supply chain vendor risk management.

Sayari Graph provides the following features to enable efficient and successful TBML investigations:

• Easily access shipment information, such as shipper and receiver, Harmonized System (HS) codes, package weight and type, the associated bills of lading, carrier names, arrival and departure information, and more.
• Conduct thorough due diligence checks on existing and potential operators with basic vessel characteristics such as name, IMO number, year of build, and flag as well as vessel ownership levels, including beneficial owner, commercial operator, registered owner, and more.
• View import and export activity in more than 12 key international markets, including China, Brazil, Colombia, Mexico, Panama, the United States, and Venezuela. 
• Gain a clear picture of relevant shipping activity to uncover sanctioned entities, TBML risk, high-risk intermediaries, and suspicious shipment or vessel ownership anomalies in supply chains.

Want to see how Sayari Graph can help you with your TBML investigations? Check out our latest trade data and other sources and sign up for a personalized demo of Sayari Graph to see the data in action.