A critical approach to trade-based money laundering
DOI | https://doi.org/10.1108/JMLC-01-2013-0001 |
Date | 06 May 2014 |
Pages | 230-242 |
Published date | 06 May 2014 |
Author | Melvin R.J. Soudijn |
Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
A critical approach to
trade-based money laundering
Melvin R.J. Soudijn
Research Division, KLPD, Woerden, The Netherlands
Abstract
Purpose – The purpose of this paper is to broaden the discussion on trade-based money laundering
(TBML). The literature is too narrowly focused on the misrepresentation of the value, quantity or
quality of the traded goods. This focus leads to the analysis of price anomalies as a signal of over- or
under-invoicing. However, TBML can also occur without manipulation of these factors.
Design/methodology/approach – A review of the literature and case study of police investigations.
Findings – Financial action task force (FATF) denitions are seriously awed. The question of
whether detecting TBML on the basis of statistical trade data is effective should be much more open to
debate. Police investigations show that goods are shipped at their true value within the context of
TBML.
Research limitations/implications – Using outliers to identify and act on cases of TBML has often
been propagated, but scarcely been used to actually show TBML. Real ndings are needed.
Practical implications – Goods intended for TBML can also be paid for in cash. These cash
payments are often out of character with the normal clientele. This should alert companies and
compliance sections of banks alike.
Originality/value – The critique on the FATF denition opens the eld for a more tting denition.
The description of actual TBML cases makes it possible to better understand this method of money
laundering.
Keywords Prevention, Proceeds of drug crime, Trade-based money laundering
Paper type Research paper
Introduction
The nancial action task force (FATF), an inuential international organisation for
combating money laundering and terrorist nancing, is continually calling for more
codication, regulation and standardisation of all kinds of nancial and business
transactions. If it was up to the FATF, every nancial or business transaction has to
adhere to special regulations. A well-known example to the nancial community (and its
researchers) is the FATF’s “40 recommendations and 9 special recommendations to
combat money laundering and nancing of terrorism” (FATF, 2001,2003,2009). As of
2012, these 49 recommendations have been reshufed and re-integrated in a new report
(FATF, 2012).
Of course, trying to combat money laundering and terrorism nancing is a
respectable cause. However, the problem with trying to regulate all aspects of business
The author works for the Dutch National Police, Woerden, The Netherlands. This article is written
in a personal capacity. An adaption of this article will also appear in Van Duyne’s et al. (2013);
Organised Crime by hindsight, Corruption and Crisis in Enforcement. Nijmegen: Wolf Legal
publishers (upcoming).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
JMLC
17,2
230
Journal of Money Laundering Control
Vol. 17 No. 2, 2014
pp. 230-242
© Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-01-2013-0001
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