Prof. Dr. Nassif jassim Aljboory
Trade Based Money Laundering (TBML) or Trade Based Financial Crime is a term that covers a broad spectrum of services and products, including Trade Finance. The Financial Action Task Force (FATF) defines TBML as the process of disguising the proceeds of crime and moving value through trade transactions to legitimize their illicit origin. This often involves abusing the financial system through fraudulent transactions using various money transmission instruments, such as wire transfers and trade finance instruments like documentary credits, documentary collections, guarantees, and standby letters of credit.
understanding trade-based money laundering .
• The Financial Action Task Force (FATF) recognized the misuse of the trade system as one of the main methods by which criminal organizations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy. This method of money laundering (ML) is based upon abuse of trade transactions and their financing. As the anti-money laundering (AML) and counter-terrorist financing (CFT) standards that have been applied to other money laundering techniques (i.e., misuse of the financial system (both formal and alternate) and through physical movement of cash (cash smuggling)) have become increasingly effective, such abuse of trade finance and the trade system has become progressively attractive to money launderers and terrorist financiers.
• The term trade finance refers to the financial component of an international trade transaction (i.e., managing the payment for goods and related services being imported or exported). Trade finance activities may involve, among other things, managing payments for open account trading, or issuing letters of credit, standby letters of credit and guarantees.
• Trade-Based Money Laundering (TBML) is defined as “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illegal origin or finance their activities”.
• In summary, the primary aim of any TBML scheme is the deliberate movement of illicit proceeds through the exploitation of trade transactions. In doing so, criminals may engage in a range of other potentially unlawful activities through the misrepresentation of the price, quantity or quality of imports or exports by methods such as preparing false invoices, mischaracterizing goods to circumvent controls, and other customs and tax violations. Moreover, trade-based money laundering techniques vary in complexity and are frequently used in combination with other money laundering techniques to further obscure the money trail. But the aim of TBML – unlike trade-related predicate offences – is not the movement of goods, but rather the movement of money, which the trade transactions facilitate.
Another key distinction of TBML schemes is the involvement of Professional Money Launderers (PMLs). Whereas criminals perpetrating trade-related predicate offences are usually the ultimate beneficiaries of those illicit proceeds, PMLs offer specialist expertise using a range of ML techniques (e.g. TBML) to diversify their risk exposure. These PMLs take receipt of the criminal proceeds on behalf of the Organised Criminal Groups (OCGs) and transfer or convert those proceeds, including via TBML schemes, before passing them back to the OCG, minus the payment of their fee or commission.