Trade-based Money Laundering and Assets Tracing � The Increased Risks and Hurdles Faced by Corporations

Key Highlights 

What Is TBML and What Are the Main Types of TBML?

Speaking on the topic of TBML, Stefano said, “The Financial Action Task Force describes trade-based money laundering as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins. The aim of TBML is not movement of goods but rather movement of value.” While financial institutions are privy to a high level of scrutiny over domestic and international payments, often corporates also get pulled up in case of suspected transactions. There are four types of TBML: 

• Over-invoicing – Inflated invoices are submitted by the exporter to the importer, leading to a payment exceeding the value of the shipped goods.
• Under-invoicing – The exporter submits an invoice below the real value to the importer, causing the shipped goods to have a higher value than declared.
• Multiple invoicing – Issuing more than one invoice for the same transaction to receive multiple payments. This is generally accomplished by using different financial institutions which complicates the traceability of the funds.
• Over-/under-shipment – The transfer of value to the importer or exporter is accomplished by over-/under-shipping goods.

Stefano mentioned that corporates can avoid becoming fronts for TBML by “adopting basic Know Your Customer (KYC) standards for those customers with large or anomalous trends. For instance, who is the buyer? How long has the buyer been in the market? Is the buyer or the directors or shareholders of the company sanctioned or blacklisted? Who is the ultimate beneficial owner? What is the company’s or the director’s reputation?” 

Asset Tracing investigations 

While stressing on the importance of asset tracing, Stefano mentioned, “It is an equally large and complicated topic, but it is fundamental to understand that the satisfactory resolution of commercial disputes or the recovery of proceeds of fraud embezzlement frequently depends on successfully tracing and recovering of assets. The location and the ownership of those assets are often obscured through a complex web of nominees, proxies and corporate trust structures with the assets disbursed across multiple jurisdictions; this makes tracing the funds of these assets pretty complicated.”