Trade-based money laundering: with special focus on trade finance instruments

Trade-Based Money Laundering (TBML) represents an important channel of criminal activity. Given the high growth of international trade in recent years and lack of specific international standards to combat money laundering in this sector, TBML has become increasingly attractive to criminals. The paper gives a brief overview of major typologies used by criminals to launder money via international trade, with special focus on the vulnerability of international trade finance instruments to money laundering. It analyses case studies from different countries and attempts to list some red flags which may be considered by relevant financial institutions and law enforcement agencies to detect and combat money laundering through international trading system. The paper also critically examines the current international framework and the role and effectiveness of financial institutions in preventing TBML, and argues that it has become highly imperative for the international community now to take effective action to target TBML.