CTPAT | Identifying Trade Based Money Laundering

The Financial Action Task Force (FATF) defines Trade Based Money Laundering (TBML) as ‘the process of disguising the proceeds of crime using trade transactions to mask the origins then integrating it back into the formal economy.’ TBML presents a growing risk for supply chains, as seemingly legitimate transactions are exploited by infiltrators to launder funds to finance criminal activity. TBML schemes are easily overlooked because of how difficult it is to detect the small changes in transactions made overtime, leaving the potential of TBML to continue without the company’s awareness.

The CTPAT program addresses TBML in three areas: business partners, specialized training, and procedural security. Beginning with specialized training is the most effective method to revamp your supply chain security measures from the ground-up. It is imperative to start with training in order to succeed in setting the standards for business partners and procedural security. In training, companies must focus on how to recognize warning signs of TBML in day-to-day operations. Examples of personnel who should receive this training include those responsible for trade compliance, security, procurement, finance, shipping and receiving. Spotting TBML typically involves recognizing signs of the misrepresentation of price, quantity, or quality of imports or exports.

Pay attention to these warning signs:

• High Risk Jurisdictions
• False Reporting
• Lack of Documentation
• Incorrect Pricing
• Inconsistent Shipping Routes
• Use of Large amounts of Cash
• Uncharacteristic Purchases
• Letter of Credit – usage that presents abnormally complex terms

Controlling TBML is part regulation, part international business cooperation and part technology solutions; however, it significantly depends on human factor recognition and action. As highlighted by Mr. Allen Gina, “many companies are aware of the attempts made by bad actors to compromise their cargoes and conveyances to smuggle illicit items into and out of a country, yet many of these same companies are unaware of how vulnerable they may be to trade-based money laundering (TBML)”. The Department of Homeland Security, estimates that annual trade-based money laundering exceeds billions of dollars in value and is growing each year.

There is no better security tool than a well-informed employee who is committed to the security culture of their company.  As CTPAT members continue to comply with the Minimum Security Criteria, it remains critical that training programs are updated to include new and emerging threats.  The topic of TBML does not typically rise to the top of the list when updating training curriculums but as CTPAT has included it in the within the requirement to have a written, risk based process for screening new business partners and for monitoring current partners, companies must prioritize TBML awareness throughout their network.