Trade-Based Money Laundering

Chapter 2Trade-Based Money Laundering Techniques: Invoice Fraud

In traditional money laundering involving the transfers of money, criminals seek to wash, launder, or legitimize illicit funds. Generally, they use a variety of techniques to first place dirty money in financial institutions in ways that do not trigger the financial transparency reporting requirements briefly described in Chapter 1. They next layer the money by frequently moving it between accounts or wiring it from bank to bank, often through multiple jurisdictions. Finally, criminal organizations integrate the laundered money back into the economy by purchasing real estate, businesses, investing in the stock market, and so on. The above three stages of money laundering are designed to make it difficult for investigators to follow the money trail. (See Appendix A for an overview of the three stages of money laundering.)

In TBML, criminals likewise seek to legitimize funds. They do so by genuinely or fraudulently buying and selling trade goods using a variety of techniques that very effectively transfer value in ways that sometimes bypass financial intelligence reporting requirements. Trade is also used in placement, layering, and integration.

In 2010, total global merchandise trade was approximately $31 trillion.¹ The enormous size of global commerce increases the probability of TBML. Just like in traditional money laundering when criminals mix or comingle illicit money with licit money via financial institutions, ...