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Why Trade Based Money Laundering is the Final Frontier of AML



Money laundering has been, in most cases, linked to several human vices such as corruption and human trafficking. In as much as there are several measures already in place on how to tackle the issue, implementing the solutions on international trade has not been relatively easy. International trade is a significant necessity in several countries. This has made it easy for guilty parties to go on with their practices unnoticed thus earning trade-based money laundering a place in the final frontier of Anti-Money Laundering.

What Does Trade-Based Money Laundering Mean?

This is the process by which criminals move money to other countries and transfer the assets, thus breaking the financial trail. It makes the criminal profits legitimate. One of the ways that criminals launder funds includes under or over-invoicing goods. The supplier charges above the regular market price, thus collecting profit from their collaborators. Other methods involve delivering compromised goods at high prices, over or under shipment and a state where there is no shipment but payment still takes place, called phantom shipment.

For the last few years, trade-based money laundering has increased, creating international concerns and being one of the ways for funding nuclear proliferation and terrorism. Terrorist funding has always required money to move through different countries, and trade-based laundering is one of the unnoticed avenues of doing so.

Why is Monitoring Hard?

This form of money laundering has been termed as an AML since the effort of tracking it has not provided much success. In comparison to the transit of currencies and other forms of manipulating financial services, trade-based laundering is not as easy to monitor. The primary reason for this is that international trade is too broad; therefore, checking every shipment is close to impossible. Also, the process is still paper-based, so manipulation is easier compared to electronic monitoring.

As of now, the FCA is monitoring the issue using its own industry papers, although the government is still looking for more ways to control the situation.

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