TRADE-BASED MONEY LAUNDERING: IS IT POSSIBLE TO PROMOTE LEGITIMATE COMMERCE WHILE REDUCING ILLICIT TRADE?

A Commentary from RUSI published on 1st October poses this question and, in the first in a series of Commentaries, RUSI researchers take a broad look at efforts to counteract illicit trade and trade-based money laundering.  In the next Commentary, guest contributor Jonathan Draper will discuss the challenges of tackling trade-based money laundering.  This first Commentary sets the scene, saying that criminal exploitation of the global trade system comes in 2 basic forms –

  • The trade in illicit or untaxed goods; and
  • the other is the use of legitimate trade to move or conceal criminal proceeds, (generally known as trade-based money laundering or TBML).

Both forms of criminality take advantage of the sheer scale of global trade, the article noting that globally less than 2% of containers are screened each year.  In 2012, the US Congress passed legislation requiring all incoming shipping containers to be screened abroad, in their ports of departure, but the requirement has not been implemented due to costs involved.

However, the article refers to several initiatives that give cause for cautious optimism, saying that it is important that policymakers promote rather than neglect them.  These include Trade Transparency Units, which use data shared between countries to identify anomalies, which exist in only a handful of countries to date.  Another initiative is to include financial institutions, which after all have to employ KYC and CDD, and share information with and between them – although only around 20% of global trade involves them, with the other 80% through “open account” trading, where banks merely process payments.

The article says that shipping lines, freight forwarders, customs brokers and port or warehouse administrators are in more immediate contact with the goods being traded – but, unlike banks and insurance companies, they are not typically obliged to identify or report suspicious activity.  Initiatives to involve these businesses, and their knowledge and access to information have been launched.

https://rusi.org/commentary/have-your-cake-and-trade-it-it-possible-promote-legitimate-commerce-while-reducing

This was a subject which I was I was concerned with in a previous existence, and attempted to assist the community I served in drafting and having published a Public Notice on the subject –

https://www.gov.im/media/1348726/notice-1000-man-trade-based-money-laundering-july-18.pdf

This blog is primarily for my own use, to keep informed and up to date. However, if you would like to say thank you (and perhaps help me get a new, better laptop when I am away…) you can “buy me a coffee” at https://www.buymeacoffee.com/KoIvM842y

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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