Transshipment and trade‐based money laundering

Abstract

Purpose

As determined by the Financial Action Task Force, trade‐based money laundering (TBML) has become one of the three major money laundering methods used today. However, there has been very limited acknowledgment of the risk and counter‐measures against TBML until recently. This is particularly problematic with ever increasing trade volumes through transshipment and container shipping which is getting larger by the day. This paper aims to examine the role of TBML as a vehicle for terrorism financing and laundering proceeds of other criminal activity. It also examines the practice of transshipment, analyzes the challenges that this particular phenomenon poses to detection of TBML activity, and looks at possible alternative policy responses to mitigate additional money laundering risks.

Design/methodology/approach

This paper analyzes reports made by international organizations and government bodies, particularly, the US Government, dealing with various aspects of financial crime, import/export activity, and world trade statistics, in order to identify major challenges and possible solutions to the problem. Interviews were also conducted with the same goals.

Findings

Efforts to monitor and staunch the flow of illicit money through trade would be enhanced through more widespread coverage of customs cooperation and standardization of information sharing procedures between national customs agencies. Also, measures should be taken to make free trade areas more transparent to regulatory scrutiny.

Originality/value

This paper serves to expand the limited amount of scholarship on TBML and to suggest a policy approach towards detection of this kind of money laundering activity to policymakers.

Citation

Liao, J. and Acharya, A. (2011), "Transshipment and trade‐based money laundering", Journal of Money Laundering Control, Vol. 14 No. 1, pp. 79-92. https://doi.org/10.1108/13685201111098897