Trade-based money laundering: an obstacle to trade facilitation

Abstract

Money laundering has become an international challenge and now it is a multidisciplinary topic. The amount of global money laundering has been estimated about 2-5 percent of the world Gross Domestic Product. Criminals have misused the financial liberalization policies advocated by the International Monetary Fund for laundering criminal proceeds. The author points out that regulations and laws on financial sector, however, could considerably control the money laundering and as a result, launderers gradually move to the trade sector. In author’s opinion, international trade is subject to range of vulnerabilities and risks today owing to exploiting trade simplification proceedings. Therefore, the author highlights the importance of being aware of these risks. By surveying diverse techniques and approaches to the problem in the literature, this study, therefore, examined the threats associated with trade facilitation that can be exploited by money launderers. The author also tried to find suitable anti-money laundering policies which cannot impede the expectations of trade facilitation. In the study, the author used general scientific methods: analysis, synthesis, comparison, generalization. Developed mathematical tools are described in the study as instruments to trace anomalies in trade transactions. The author’s major recommendations are make use of such analytical tools by establishing a permanent unit to frequently analyze the trade data so as to detect illicit transactions. The author also reveals some shortcomings pertaining to anti-money laundering policies in fighting trade-based money laundering. Basically, staff attached to the customs, tax authorities and law enforcing agencies have relatively low knowledge on trade-based money laundering compared to their knowledge on other means of money laundering. In conclusion, the author states that frequent analyses of trade data and sharing of information and knowledge with other local and foreign agents seems to be more effective policies in controlling trade-related money laundering.