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A critical approach to trade-based money laundering

Melvin R.J. Soudijn (Research Division, KLPD, Woerden, The Netherlands)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 6 May 2014

1502

Abstract

Purpose

The purpose of this paper is to broaden the discussion on trade-based money laundering (TBML). The literature is too narrowly focused on the misrepresentation of the value, quantity or quality of the traded goods. This focus leads to the analysis of price anomalies as a signal of over- or under-invoicing. However, TBML can also occur without manipulation of these factors.

Design/methodology/approach

A review of the literature and case study of police investigations.

Findings

Financial action task force (FATF) definitions are seriously flawed. The question of whether detecting TBML on the basis of statistical trade data is effective should be much more open to debate. Police investigations show that goods are shipped at their true value within the context of TBML.

Research limitations/implications

Using outliers to identify and act on cases of TBML has often been propagated, but scarcely been used to actually show TBML. Real findings are needed.

Practical implications

Goods intended for TBML can also be paid for in cash. These cash payments are often out of character with the normal clientele. This should alert companies and compliance sections of banks alike.

Originality/value

The critique on the FATF definition opens the field for a more fitting definition. The description of actual TBML cases makes it possible to better understand this method of money laundering.

Keywords

Acknowledgements

The author works for the Dutch National Police, Woerden, The Netherlands. This article is written in a personal capacity. An adaption of this article will also appear in Van Duyne's et al. (2013); Organised Crime by hindsight, Corruption and Crisis in Enforcement. Nijmegen: Wolf Legal publishers (upcoming).

Citation

R.J. Soudijn, M. (2014), "A critical approach to trade-based money laundering", Journal of Money Laundering Control, Vol. 17 No. 2, pp. 230-242. https://doi.org/10.1108/JMLC-01-2013-0001

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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