TBML: A Big Picture of the Problem and How to Solve it
Financial institutions have a critical role to play in combating various financial crimes such as money laundering, terrorist financing, bribery and corruption, proliferation of weapons of mass destruction and breach of economic, financial and trade sanctions. They face risks of legal liability, regulatory sanctions, financial loss, and reputational damage for failure to comply with applicable laws and regulations with regard to the detection and prevention of financial crime.
Financial crime compliance might be regarded by some as an occupational hazard for providers of financial services. It offers little, if any, reward and exposes financial institutions to severe penalties for breaches. However, the motivation to combat financial crime ought to transcend risks and rewards for financial institutions. The integrity of the financial system is essential for the support of legitimate financial flows and is the responsibility of all stakeholders.
This article focuses on the topic of “trade-based money laundering” (TBML) which the Financial Action Task Force (FATF) has defined as “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illegal origins or finance their activities.”1 According to the FATF, that which distinguishes TBML from other trade-related crimes (e.g. smuggling) is that TBML’s aim is the movement of money rather than goods. The primary objective of any TBML scheme is the deliberate movement of illicit funds proceeds by exploiting trade transactions.