Trade-Based Money Laundering red flags allow criminals to transfer and integrate their proceeds across borders while hiding their source.
Through international trade, all these criminals make business and crime look the same. The rise shows larger, more complex TBML attacks. So, firms and banks must guard against TBML fraud.
Familiar with the signs of TBML to avoid becoming a victim of such scams. This is because as global trade increases, so do the ways through which money is laundered.
Authorities said that they had recorded an increased number of TBML-related cases within the first half of 2024, with an increase rate of 15%.
This underscores the importance of identification and a search for measures to combat this. TBML threats are relatively newer and more widespread than traditional money laundering risks.
Understanding and recognizing the common signs of TBML would go a long way in preventing these risks and keeping markets compliant with AML.
Invoicing Anomalies
Certain distortions in invoicing are a telltale sign of Trade-Based Money Laundering (TBML). Criminals might overstate the export value to transfer more money abroad.
They might understate the import value to hide illegal wealth. The FATF report published in 2024 suggested that in 22 percent of TBML Red flags, irregularities in invoicing have been observed.
These differences in invoice values should call for the best investigation to check whether or not there exist money laundering operations.
Unusual Shipping Patterns
To discover red flags in money laundering, it is instrumental in tracking delivery passports and deliverer’s destinations. This is because most stolen goods will follow any deviant pattern.
This includes shipments that may take unpredictable routes. Goods may be delivered to high-risk areas, which are prime indicators of fraudulent works.
In 2023, Interpol reported an 18% rise in cases linked to TBML. It was due to changes in shipping patterns.
This impels criminals to use shell companies and, outside regular shipping channels, the need to follow the flow of shipping activities.
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Cash Payments in Trade
Large cash transactions hardly exist in international trade, and the presence of such transactions should raise suspicion of money laundering.
As most business is done online, we should ban cash deals, especially large ones. BIS stats for last year show a trend.
Only 10% of trade payments are now in cash. This is significant since cash payments are rare and risky.
Inconsistent Payment Methods
As payment methods differ from what is expected of a transaction and its related risks, there are likely tries to hide the nature of the transaction.
For instance, if a customer insists on paying by cash, check, or money order and not by Visa or PayPal, this should raise a TBML alarm. In 2024, FinCEN saw a 12 percent rise in suspicious transactions involving unusual payment methods.
High-Risk Jurisdictions
Any transaction that has links to countries with lax legal requirements or those countries often referred to as havens of tax evasion is associated with TBML.
Money launderers often flock to areas that can easily enable low and/or no regulation of AML processes. Papules suggest that TBML is rising.
A 2024 Global Financial Integrity report found that 30% of TBML cases are linked to high-risk countries. Being aware of specific jurisdictions and closely scrutinizing any transaction that involves such a locality is important if one is to identify potential TBML.
Frequent Amendments to Letters of Credit
Any transaction that has links to countries with lax legal requirements or those countries often referred to as havens of tax evasion is associated with TBML.
Money launderers often flock to areas that can easily enable low and/or no regulation of AML processes. Papules suggest that TBML is rising.
A 2024 Global Financial Integrity report found that 30% of TBML cases are linked to high-risk countries.
Being aware of specific jurisdictions and closely scrutinizing any transaction that involves such a locality is important if one is to identify potential TBML.
Mismatched Documentation
Typical signs of TBML include differences in the description of the goods and the documents accompanying them.
If the invoices don’t match the shipped goods, the trade records are tampered with. The 2024 AML compliance report shows that 20% of TBML cases involved mismatched documentation, meaning that more scrutiny is required on trade documents.
Transactions Involving Third Parties
payments made by third parties who have no relevance to the specific transaction may also indicate TBML. If a third party makes a payment, it might be devised to hide the identity of both buyer and seller.
A 2024 study by Financial Crime Trends found that 17% of TBML activities involved third-party payments. Therefore, the identity of all individuals participating in a particular transaction should be established.
Unusual Trade Financing Structures
The use of multiple letters of credit and payment guarantees, which are not genuine to the business, can complicate the transactions.
The 2024 Global Trade Finance Survey found that 16 percent of TBML cases involved strange financing structures. So, we need to investigate the trade financing for any flaws.
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