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Trade-Based Money Laundering

Trade-Based Money Laundering. Kabul, Afghanistan April, 2006. Financial Transparency. Successful in War on Narcotics Unsuccessful in War Against Terrorist Finance Terrorism Finance is “Inverse Partner” of traditional Money Laundering New tools necessary.

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Trade-Based Money Laundering

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  1. Trade-Based Money Laundering Kabul, Afghanistan April, 2006

  2. Financial Transparency • Successful in War on Narcotics • Unsuccessful in War Against Terrorist Finance • Terrorism Finance is “Inverse Partner” of traditional Money Laundering • New tools necessary

  3. Growing Threat of Alternative Remittance Systems • “Systems” bypass, in whole, or part financial transparency network • Little or no financial intelligence/paper trail generated • Indigenous/ethnic based systems • Systems developed to avoid taxes and government scrutiny • Difficult to penetrate

  4. Examples of Alternative Remittance Systems • Hawala • Black Market Peso Exchange • Misuse of international gold and diamond trade • Chinese “chit” system • Common denominator: TRADE

  5. Examples of Trade-BasedMoney Laundering • Fictitious invoicing • Double invoicing • Barter trade • Export incentive fraud • Counter valuation • Over/under invoicing

  6. Overvaluation to FacilitateMoney Laundering Export cargo with a value of $100,000 Invoices, bills of lading, export documents, etc. Falsify the invoices and other documents to show a value of $200,000 $200,000 $200,000 is sent in payment, which includes laundered $100,000

  7. Example of Under Invoicing • Talat owes Ahmed $200,000 as part of previous business transaction • Decides to pay debt by “under invoicing” shipment of goods • Talat sends $500,000 worth of goods, but only invoices Ahmed for $300,000 • The extra value of goods ($200,000) covers the original debt

  8. High U.S. Import Prices Plastic Buckets from Czech, $972 /unit Briefs and panties from Hungary, $739/doz Cotton dishtowels from Pakistan, $153/unit Ceramic tiles from Italy, $4,480 sq. meter Metal tweezers from Japan, $4,896 per unit Razors from the U.K., $113 /unit Camshafts from Saudi Arabia, $15,200/ unit Iron bolts from France, $3,067 /kg Toilet tissue from China, $4,121 /kg Low U.S. Export Prices Live cattle to Mexico, $20.65 / unit Radial truck tires to U.K., $11.74 /unit Toilet bowls to Hong Kong, $1.75/unit Bulldozers to Colombia, $1,741/unit Color video monitors to Pakistan, $21.90/unit Gold Watch Casings to Colombia $8.68/unit Prefabricated buildings to Trinidad, $1.20/unit True Examples ofAbnormal U.S. Trade Prices

  9. Indicators and Trends Trade-Based Money Laundering • Cash for high-value orders • Items priced well over or under market value • Mismatch between customer and items ordered • Business transfers made for no apparent reason • Third-party financing • Packaging inconsistent with contents • Routing is circuitous or economically illogical. • Size or weight of goods is inconsistent with contents

  10. Abnormal Import Weights Port Product Country Weight San Fran Brief Cases Indonesia 98kg/unit San Fran Carpet Iran 63kg/sq meter L.A. Pens Malaysia 8.7 kg/unit L.A. Televisions Malaysia 202 kg/unit L.A. Carpet Pakistan 62/kg/sq meter

  11. 45901066907 19941230 45206 4040 $125,160.00 $30.98 45901067293 19950111 45206 6000 $187,740.00 $31.29 45901067723 19950118 45206 5000 $156,450.00 $31.29 45901068184 19950125 45206 6000 $187,740.00 $31.29 45901068697 19950131 45206 6000 $187,740.00 $31.29 45901070545 19950223 45206 6000 $187,740.00 $31.29 45901071766 19950316 45206 6000 $202,860.00 $33.81 45901074281 19950424 45206 7000 $236,000.00 $33.71 45901073911 19950424 45206 6200 $212,400.00 $34.26

  12. Gold Bullion delivered from Brazil (in grams) Gold Scrap from Argentina

  13. Gold Exported From Guyana, 8 Arrested Gold Exported From Surinam, 40 Arrested

  14. Gold Exported From Guyana, 8 Arrested Gold Exported From Surinam, 40 Arrested

  15. Trinidad: No Gold Production Netherlands Antilles: “Miraculous Gold Strike”

  16. Operation Meltdown

  17. METHODS OF SMUGGLING GOLD OUTBOUND

  18. Exports of VCRs to Colombia

  19. Exports of Refrigerators to Colombia

  20. Countermeasure:Trade Transparency Units • Borrowing from the successful Financial Intelligence Unit (FIU) model, create an international network of Trade Transparency Units (TTUs) that will collect, analyze, and disseminate narrowly focused trade data to help combat trade related crime.

  21. Advantages • Proven concept – this works! • Little cost • Excellent tool to monitor/investigate/disrupt all forms of trade based money laundering • Customs fraud reduced • Government revenues increased

  22. Summary • Need to develop new tools • Trade is common denominator in many underground finance systems • Enforcement can use trade as the “back door” for intelligence and investigations • “Trade Transparency” is the next frontier in anti-money laundering

  23. Thank You !Questions? John Cassara

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