Common techniques are over- and under-invoicing, multiple invoicing of the same shipment, over- and under-shipment, and misdescription of goods, as well as phantom shipments where no goods move at all. It is hard to detect because trade finance data is fragmented and paper-heavy.
Example
An exporter sells goods worth USD 10,000 but invoices USD 50,000 to a related company abroad, moving USD 40,000 of value across the border.
Where it appears in the exams
This topic is relevant for CAMS, CFCS.
Read more
Trade-based money laundering (TBML) explained: techniques, red flags and controls
Related terms
- Layering: Layering is the second stage of money laundering: moving funds through many transactions, accounts, companies or countries to hide where they came from.
- Shell company: A shell company is a legal entity with no real operations, employees or assets of its own, often used to hold assets or move money without revealing who owns it.
- Hawala: Hawala is an informal value transfer system in which money is moved through a network of brokers based on trust, often with no physical transfer of funds between the two ends.
Source: FATF and Egmont Group: Trade-Based Money Laundering Trends and Developments (2020). Independent explanation for study purposes, not legal advice.