Trade-Based Money Laundering (TBML) definition and meaning | AML glossary
Trade-based money laundering (TBML) definition: What it means in AML compliance.
Trade-based money laundering (TBML) is a form of financial crime where illicit funds are moved through international trade transactions. Criminals exploit trade systems by over or under-invoicing goods, misclassifying goods, or creating false documentation to hide the origin or destination of money. TBML is one of the most complex methods of money laundering due to the global scale and involvement of multiple entities.
How trade-based money laundering works.
Criminals use various techniques to facilitate TBML:
- Over or under-invoicing: This involves inflating or deflating the value of goods on invoices to move money across borders.
- Multiple invoicing: Creating multiple invoices for the same goods to move funds multiple times.
- Falsified descriptions of goods: Declaring goods as something they are not, to disguise their value and destination.
- Phantom shipments: Falsifying shipments of goods that never actually occur, with the intent to launder money.
What are the signs of trade-based money laundering?
Businesses can look out for these potential indicators of TBML:
- Discrepancies in pricing compared to market norms.
- Unusual payment terms, such as advance payments for goods that should require normal credit terms.
- Inconsistent or complex trade routes that make little commercial sense.
- Lack of documentation or conflicting details in shipment paperwork.
How businesses can detect and prevent trade-based money laundering.
To reduce the risk of involvement in TBML, businesses should:
- Perform detailed trade and transaction screening, especially for high-risk jurisdictions.
- Verify shipment documentation to ensure goods are actually being delivered.
- Monitor for discrepancies between the invoiced value and market price.
- Use advanced technology to flag suspicious activities based on trade patterns and discrepancies.
How technology can help combat trade-based money laundering.
Advanced AML technologies play a crucial role in detecting and preventing TBML. Automated trade and transaction screening systems can help businesses spot red flags such as pricing anomalies, multiple invoicing, and false documentation. By leveraging data-driven analytics, firms can identify suspicious transactions and report them promptly, ensuring compliance with international AML regulations.
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