Insight

What is Trade-Based Money Laundering?

Money laundering is the movement of illicit proceeds procured through criminal activity in an attempt to “clean” or disguise the origin of the funds. Each year hundreds of billions of dollars are laundered in the global marketplace; the majority of that conducted via the technique, trade-based money laundering.

Trade-Based Money Laundering (TBML), simply put, is the process of disguising the proceeds of crime and moving value through trade transactions, using various global currencies, in an attempt to legitimize their illicit origins. Methods of TBML include:

  • Over or under-invoicing the value of goods (i.e. houses, cars, boats, planes, etc.)
  • Moving illegal goods
  • False-invoicing

TBML techniques vary in complexity and are frequently used in combination with other money laundering techniques to further obscure the money trail. Uncovering any form of TBML is one of the highest priorities for Tempus and requires a thorough review of all available client and beneficiary information.

When determining the presence of TBML, Tempus reviews each account thoroughly for legitimacy, creditworthiness, and ensures that the business has a legitimate purpose to transact. These parties in question are run through numerous verification sites and prohibited lists to minimize the risk of fraudulent or TBML activity flowing through our bank accounts. Tempus also reviews all transactions posted by clients for any affiliation with illegal or illicit activities. Tempus’ Anti-Money Laundering professionals remain informed on current TBML schemes to ensure that all funds are safely and legally transmitted in a timely manner.

In recent years, the presence of TBML has dramatically increased as the world shrinks and global economies continue to intertwine in new and always changing business ventures. It is estimated that between 14% and 24% of trade in developing and emerging economies between 2005 and 2014 was derived from illicit funds; a significant number and an unfortunate hurdle for growth in these particular markets. One of many causes of this spike includes digital currencies’ growing presence, which has aided criminals in TBML as it is highly unregulated and adds layers to already complex financial transactions. Ultimately, it is important that as members of the financial community, we all keep an eye out for TBML activity to maintain the safety and security of the money transmitter and exchange business, starting with the seemingly small act of opening an account with Tempus.

Justin Jenter Senior Compliance Associate Tempus

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