Transforming the Fight Against Trade-Based Money Laundering: New Data and Partnerships
Introduction
International trade is a powerful tool for advancing development and reducing poverty. However, it is also attractive for money laundering due to the complexity and volume of international trade and trade financing instruments. Trade-based money laundering (TBML) involves hiding illegal sources of money through trade transactions, making it challenging to identify and prevent.
Key Points
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Critical Importance of TBML
- Countering TBML is essential for promoting trade transparency, building trust, and ensuring predictability in global supply chains.
- TBML involves tragic human costs and consequences that are massively underestimated and underreported.
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Current Challenges
- TBML is not a high priority for police, intelligence agencies, and prosecutors due to the complexity and long timelines of investigations.
- FATF notes that TBML techniques vary globally and are often used alongside other money laundering methods, complicating tracing.
- The World Economic Forum estimates that the economic and tax losses from TBML in developing countries exceeded $9 trillion between 2008 and 2017.
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Pilot Project Overview
- The Asian Development Bank (ADB) collaborated with the United Nations Office on Drugs and Crime (UNODC) to implement a pilot project in five countries: Bangladesh, Mongolia, Nepal, Pakistan, and Sri Lanka.
- The project aimed to:
- Create tailored suspicious transaction reports (STRs) for trade transactions.
- Provide extensive TBML training.
- Enhance collaboration between agencies and countries in fighting TBML.
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Results of the Pilot
- Each country identified more suspected TBML cases.
- Data collection and analysis were improved.
- Important insights were gathered on TBML-susceptible goods and trade routes.
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Challenges in Identifying and Reducing TBML
- Cross-border nature of the crime.
- Lack of reliable statistics.
- Limited knowledge of trade processes among investigators.
- Competing priorities and limited resources for customs agencies and FIUs.
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Measuring the Problem
- The "global value gap" reflects the unexplained difference between officially reported import and export flows and serves as a proxy to measure potential TBML.
- Global Financial Integrity estimates the gap between developing and advanced economies' export and import declarations at $8.7 trillion for 2008–2017.
- Most countries lack reliable statistics on TBML, limiting global awareness and effective countermeasures.
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Improving Reporting Formats
- Current STR formats are designed for payment transactions, lacking detailed trade information.
- Trade financing techniques require extensive documentation that provides valuable details.
By addressing these challenges and improving data collection and analysis, the pilot project aims to enhance the fight against TBML and build a more robust international trade system.
