Previous:   Understanding Trade Based Money Laundering (TBML): Methods and Red Flags

The scale of Trade based Money Laundering (TBML)!

According to the United Nations -

"The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars"

It is estimated that -

More than $45 billion is spent annually for compliance with financial crime in Australia, China, India, Japan and Singapore.

And one of the most favourite way of money launderers to launder money is international trade. But how is trade based money laundering different from other methods of money laundering? Let us find out.

How is TBML different from other money laundering methods?

Increase in TBML is directly linked to boom in international trade volume

With the advent of globalisation, there has been a boom in international trade in the last few decades which in turn has resulted in the massive occurrence of TBML in present times. Increase in trade based money laundering is directly linked to boom in international trade volume. Just as there is a need for global trade to expand rapidly, there is a need for effective regulation and constant monitoring of trade so that its abuse can be prevented as far as possible.

TBML usually involves multiple countries unlike other money laundering methods

Trade Based Money Laundering is a kind of money laundering which uses international trade occurring over more than one country, while other forms of money laundering may occur within a single country. One country may have less stringent Customs checks (Free Trade Zones) and Anti Money Laundering processes than other countries and money launderers can take advantage of this difference in the legal systems.

TBML involves both the trade sector and the finance sector

TBML is such a crime that requires intermingling of the trade sector with the finance sector. Criminals take advantage of vulnerabilities of both these sectors. So for any country, just having a strong anti money laundering policy for the finance sector is not enough, unless there is a similar policy that effectively covers the corresponding trade sector too.

TBML usually involves currency conversion unlike other methods

In international trade, conversion of one currency to another is a norm. This gives the criminals yet another scope to disguise the crime by converting the currency of the illegal money and making it difficult to track and trace.

TBML exploits the long supply chain in international trade

The long supply chain necessary for international trade makes the trade more vulnerable to TBML. The longer the list of participants, the more is the complexity, and more is the opportunity for criminals to find weak points to launder the money.

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