Trade-based money laundering (TBML) harms legitimate trade, national and international markets, as well as global financial systems. It also poses threats to national security, global peace, prosperity and the safety of various communities. Currently, there are no official statistics for TBML, but its magnitude is estimated at hundreds of billions of dollars annually. Although TBML is rapidly growing both in terms of its magnitude and global coverage, it remains significantly understudied. This oversight results in a lack of effective policy responses to TBML.1
On September 18, 2019, the Terrorism, Transnational Crime and Corruption Center (TRaCCC) at the Schar School of Policy and Government at George Mason University, in collaboration with the Targeting Natural Resource Corruption consortium and the Anti-Corruption Advocacy Network, convened for comprehensive discussions regarding TBML. Panels and break-out sessions were conducted by over 15 distinguished professional experts from a broad spectrum of involved parties, including the financial industry, government, ACAMS, think tanks, nongovernmental organizations (NGOs) and academic communities. Topics addressed included the definition and scale of TBML and its impact and effects on financial institutions (FIs), businesses, governments and the private sector. The general and breakout sessions also explored many complex TBML-related schemes and the program included a pertinent lunchtime address by Sen. William Cassidy (R-LA).
The conference was chaired by Dr. Louise Shelley, university professor and TRaCCC center director. The resulting2 report was authored by Dr. Yulia Krylova and contains a list of recommendations that were developed by conference participants in their collective effort to tackle this problem. These are listed below.
Building Public–Private Partnerships
- To develop public-private partnerships to combat TBML, it is important to introduce legislative incentives for the development and implementation of public-private partnerships in this arena, similar to the Joint Money Laundering Intelligence Taskforce in the United Kingdom. It is also necessary to remove barriers to public-private partnerships that often exist within agencies and private organizations.
- To engage trade actors in public policy discussions and the implementation of specific anti-TBML programs, it is important to invite associations and representatives of shippers, importers, exporters, ports, customs authorities and other trade actors to discussions about their involvement in anti-TBML programs, building their capacity to counter TBML and raising awareness about this issue in the industry.
- To assess the potential for creating a task force with representation of different government agencies, it is critical for all government and law enforcement agencies to work together on TBML because of its convergence with other types of crime, such as corruption, drug trafficking, human trafficking, terrorism and other illegal activities.
Taking a Holistic Approach to TBML
- The huge negative consequences of TBML for the national and global economies suggest a need to elevate this problem to the top of the policy agenda. Multi-stakeholder discussions of TBML and advocacy campaigns should include legislators, academia, NGOs, civil society, the private sector, customs authorities and other government agencies, as well as representatives of international organizations, such as the United Nations, the World Bank Group, the Organisation for Economic Co-operation and Development, the International Monetary Fund and other multinational agencies.
- Develop special outreach programs that involve various NGOs, civil society, government agencies, business and the general public, which will be essential for improving existing initiatives and providing feedback on strategies and policies related to TBML.
Special Strategies to Combat TBML
- To develop comprehensive mitigation plans in the trade industry, it is important to analyze the entire supply chain to be able to identify the criminal actors who make the biggest difference in that supply chain in terms of profit. This is essential for strategic allocation of the limited resources available for combating TBML. In this regard, it is important to understand the entire structure of the supply chain, its operators and the related logistics.
- In order to intensify responses of customs officers, shippers, airlines, ports and other trade actors to TBML, education and training trade professionals and customs officers is critical for combating TBML.
Improving Policy Responses to TBML
- It is key to address the issue of kleptocrats moving corrupt proceeds around the world. Illicit money often originates from contemporary kleptocratic regimes. Since 2019, there are several bills in Congress that deal with this issue, including the Foreign Extortion Prevention Act, the Kleptocrat Exposure Act, the Justice for Victims of Kleptocracy Act of 2019, and the Transnational Repression Accountability and Prevention (TRAP) Act of 2019. Sanctioning of kleptocrats engaged in corruption and human rights violations should be linked with TBML.
- It is crucial to introduce legal responses to address the current gaps in the legislature. One of the issues that requires urgent attention is the lack of beneficial ownership transparency, which is essential for all other reforms. In addition, the Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act (COUNTER Act) was introduced into Congress in May 2019. It includes several reforms to the Bank Secrecy Act and anti-money laundering laws that could be helpful for combating TBML.
- There must also be effort toward strengthening international cooperation in this arena. TBML is a global problem involving both developed and developing countries around the world. Therefore, international cooperation is of critical importance for TBML prevention at the level of the Financial Action Task Force (FATF) and other subnational authorities. Another recommendation is to expand the use of trade transparency units (TTUs) and their global network. Finally, it is important to work with various countries in terms of greater transparency within free trade zones (FTZs) and to improve their resource bases to combat TBML.
Fostering Innovative Research and Data Methods
- To improve trade data and make it more accessible, it is important to include data on FTZs―currently one of the main challenges for combating TBML―and to improve the FATF data and the related data in FATF mutual evaluation reports.
- Attention must be focused on improving methodologies to measure TBML and calculate the related risks. Currently, there are no exact estimates of TBML and there are no standardized procedures for the collection and maintenance of TBML-related data.
- It is imperative to enhance responses to TBML-based money laundering on comprehensive research conducted by interdisciplinary teams of scholars and practitioners. Specifically, it is necessary to link TBML with the global illicit financial system and to understand the architecture of the entire system and its particular elements, including tax havens and shell companies. Conducting such research will require interdisciplinary teams of scholars and practitioners, including social scientists, business analysts, risk evaluators, data analysts and computer scientists.
- It is also important to develop human skills and strengthen their tech capacities to combat TBML. Criminals are constantly looking for innovative ways and new schemes to engage in TBML. FIs and other actors should invest resources in identifying new criminal trends as early as possible.
Finally, steps must be made to develop monitoring systems and analytical tools in the financial sector further, including the use of artificial intelligence. It is important to develop and apply different techniques, including suspicious pattern recognition, anomaly detection, network analytics, attack path analysis and predictive analytics.3
Dennis Dunleavy, CAMS, principal, Dunleavy Solutions LLC, Alexandria, VA, USA, Dennis.Dunleavy@icloud.com
- Yulia Krylova, “Trade Based Money Laundering Conference Report,” Terrorism, Transnational Crime and Corruption Center, September 18, 2019,
- Ibid, 47-49.