Best Practices Paper on Trade Based Money Laundering

The FATF has issued a new best practices paper on trade based money laundering and terrorist financing to raise awareness and improve the ability of government authorities to collect and effectively utilise trade data, both domestically and internationally, for the purpose of detecting and investigating money laundering and terrorist financing through international trade.

Misuse of the trade system is one of the main methods by which criminal organisations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy. The FATF typologies studies indicate that the most basic trade based money laundering and terrorist financing schemes involve fraudulent trade practices such as: over- and under-invoicing of goods and services, multiple invoicing of goods and services, over- and under-shipments of goods and services, and falsely describing goods and services. More complicated schemes integrate these fraudulent practices into a complex web of transactions and movements of goods.

As the FATF anti-money laundering (AML) and counter-terrorist financing (CFT) standards become increasingly effective, abuse of the trade system is expected to become increasingly attractive for money launderers and terrorist financiers. However, currently, governments appear less capable of identifying and combating trade-based money laundering than they are in dealing with other forms of money laundering and terrorist financing.

The best practices paper addresses a wide range of issues to address trade based money laundering and terrorist financing, including:

• Capacity building and awareness raising
• Typologies and red flag indicators
• Domestic mechanisms to link the work of relevant authorities
• Data protection and privacy
• International co-operation