Mitigating the Risk of Trade-Based Money Laundering - Africa Service Sheet

The use of international trade to move and disguise the proceeds of crime i.e. Trade Based Money Laundering (“TBML”) activity is growing in both volume and global reach and poses a significant threat to the security and prosperity of developing economies.

It has been reported that TBML, an umbrella term for moving criminal funds through trade transactions in order to disguise their origins, is now one of the primary means that criminal organisations use to launder illicit proceeds. To determine the exact scale is not an easy task and an estimation at best.

Despite developing economies equalling and in some cases outperforming developed countries in global trade activity, limited financial and fiscal benefits flow from the increased trade activities.

Recent experiences evidenced that increased global trade activity provides various opportunities for criminals to exploit global supply chains, customs compliance procedures and financial payment arrangements to disguise the proceeds of criminal activities to legitimise the origin of illicit funds.

Given the complexity of global trade and payment arrangements and the number of parties involved in import and/or export transaction, ample opportunities exist to exploit various areas of the supply chain and documentary procedures to perform illegal activities. More so in jurisdictions where financial, regulatory and customs controls have not yet achieved the maturity as in developed countries and indicators of TBML, illicit trade and illicit financial flows are absent.

There is a distinct silo approach in facilitating the actual trade and financing thereof.

Financial institutions are customarily the primary authority for identifying suspicious financial transactional activities occurring within the financial services sector, while border control and customs authorities are tasked with identifying trade related commercial anomalies and suspicious commercial activities.