Is Trade-Based Money Laundering Growing?

The growth in world trade and financial technology has carried with it the specter of trade-based money laundering. The topic has been hot enough to spark commentary by John Cassara in an interview with The Wall Street Journal published Thursday (Dec. 31). The trend led the former United States intelligence officer and Treasury Department agent to theorize that the fight against such activity represents “the next frontier in money laundering enforcement.”

The next frontier designation, Cassara told WSJ, comes as countries around the globe have spent relatively more time, effort and resources on money laundering conducted through financial institutions and what he termed “bulk cash smuggling,” whereas the trade-based conduit has gotten shorter shrift, even though it is now the “largest and most prevalent method of money laundering.” Cassara added: “It’s been around since long before the advent of modern banking.”

Breaking down the tranches of trade-based money laundering, said Cassara, “there’s value transfer, transfer mispricing and misinvoicing underground financial systems, hawala and others.” But the common theme, he continued, is that all of those methodologies have invoice manipulation at their core.

Delving into hawala (a word meaning the concept of trust), money actually doesn’t make a physical move from place to place but does indeed get transferred, most visibly in the form of wage remittance. And yet, noted Cassara, hawala also manages to create transfers that fly below most methods of detection and can be exploited most readily by terrorist organizations, such as al Qaeda.

[bctt tweet=”Hawala also manages to create transfers that fly below most methods of detection.”]

“The great thing about trade is that data exists: Every country in the world has a customs service … anomalies should pop right out, and they do — when people look.” One of the better countermeasures comes in the form of what Cassara said is a trade transparency unit, which he told WSJ is “analogous to a financial intelligence unit … It can overlap with all sorts of data, but the concentration is on trade … [Through pacts with trading partners], you have permission to share targeted trade data for, say, suspicious transactions.”


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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.


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