HomeNewsBriefReport Highlights Importance of Trade-Based Money Laundering
BRIEF

Report Highlights Importance of Trade-Based Money Laundering

MONEY LAUNDERING / 28 JUN 2016 BY MIKE LASUSA EN

A new report from the US Congressional Research Service details the importance of trade-based money laundering for criminal networks in Latin America and outlines some of the ways the region's governments are attempting to combat illicit financial flows.

The CRS report (pdf) describes trade-based money laundering, or TBML, as "among the most challenging and pernicious forms of money laundering to investigate," and cites U.S. government estimates that suggest billions or even tens of billions of dollars in illicit wealth is laundered through TBML schemes each year.

One of the most common TBML schemes involves over- or under-invoicing of goods and services.

As the CRS report explains, using this method, an exporter can transfer money to an importer in another country by invoicing exported products at lower than market value. In this way, the importer obtains goods that are worth more than what he or she paid for them, effectively resulting in a transfer of funds from the exporter to the importer.

Similarly, an exporter can over-charge for products he or she exports, effectively transferring funds to him or her self from the importer.

Other common TBML techniques include multiple invoicing, which allows money launderers to receive multiple payments for the same product; over- and under-shipment of goods and services, which works much like over- and under-invoicing; and falsely describing goods and services, also known as mislabeling.   

One of the most famous TBML schemes is known as the Black Market Peso Exchange. The method was originally developed in the 1980s by Colombian drug trafficking groups seeking to disguise their multi-billion dollar illicit earnings, but it has also been adopted by crime groups from Mexico and other countries more recently. (See the CRS infographic below.)

16-06-28-Reg-BMPE 

The complicated system involves using illicit earnings to buy legal goods, which are exported to the crime groups' home countries and resold in the legitimate market. InSight Crime reported on a notable recent example of this scheme in the 2012 article, "The Perfume Man and Chapo's Stinking Dollars."

InSight Crime Analysis

According to the U.S. State Department's 2016 International Narcotics Control Strategy Report, concern about TBML schemes has arisen in several Latin American countries, including Belize, Brazil, Colombia, Guatemala, Mexico, Panama, Paraguay, Trinidad and Tobago, Uruguay and Venezuela. And as InSight Crime has previously reported, many of these countries face significant challenges when it comes to confronting money laundering.

Criminal organizations still rely heavily on bulk cash smuggling rather than trade-based money laundering as a means of moving their illicit earnings (pdf). However, many experts consider TBML to be one of the most difficult forms of money laundering to combat because it allows illicit transactions to be hidden within the massive and complex system of legitimate global trade flows.

SEE ALSO: Coverage of Money Laundering

For this reason, many countries in Latin America have begun to take steps to address TBML and other forms of money laundering. Most countries in the region belong to the Financial Action Task Force of Latin America (GAFILAT), an intergovernmental organization formed to facilitate cooperation on anti-money laundering efforts. Also, according to the CRS report, a number of Latin American countries have formed "Trade Transparency Units" that are specifically tasked with monitoring possible instances of TBML and other trade-related crimes.  

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

AUC / 15 SEP 2021

Dozens of properties and other assets seized from Memo Fantasma, one of Colombia’s foremost drug traffickers, will be used to…

ELITES AND CRIME / 7 APR 2021

Venezuela is increasingly turning to the cryptocurrency Bitcoin, raising questions about its possible use in laundering money and evading US…

FARC / 18 FEB 2021

A US court case seeks to compensate victims of the FARC with assets seized from Venezuelan state oil company PDVSA,…

About InSight Crime

LA ORGANIZACIÓN

Extensive Coverage of our Chronicles of a Cartel Bodyguard

23 SEP 2022

Our recent investigation, A Cartel Bodyguard in Mexico’s 'Hot Land', has received extensive media coverage.

THE ORGANIZATION

InSight Crime, American University Host Illegal Fishing Panel

19 SEP 2022

InSight Crime and the Center for Latin American & Latino Studies (CLALS) at American University discussed the findings of a joint investigation on IUU fishing at a September 9 conference.

THE ORGANIZATION

Impact on the Media Landscape

9 SEP 2022

InSight Crime’s first investigation on the Dominican Republic made an immediate impact on the Dominican media landscape, with major news outlets republishing and reprinting our findings, including in …

THE ORGANIZATION

InSight Crime Sharpens Its Skills

2 SEP 2022

Last week, the InSight Crime team gathered for our annual retreat in Colombia, where we discussed our vision and strategy for the next 12 months.  During the week, we also learned how to…

THE ORGANIZATION

Colombia’s Fragile Path to Peace Begins to Take Shape

26 AUG 2022

InSight Crime is charting the progress of President Gustavo Petro’s agenda as he looks to revolutionize Colombia’s security policy, opening dialogue with guerrillas, reforming the military and police, and…