Trade-Based Money Laundering: Overview and Policy Issues (CRS Report for Congress)
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| Release Date |
June 22, 2016 |
| Report Number |
R44541 |
| Report Type |
Report |
| Authors |
Rena S. Miller, Specialist in Financial Economics; Liana W. Rosen, Specialist in International Crime and Narcotics; James K. Jackson, Specialist in International Trade and Finance |
| Source Agency |
Congressional Research Service |
Summary:
Trade-based money laundering (TBML) involves the exploitation of the international trade system for the purpose of transferring value and obscuring the true origins of illicit wealth. TBML schemes vary in complexity but typically involve misrepresentation of the price, quantity, or quality of imports or exports. Financial institutions may wittingly or unwittingly be implicated in TBML schemes when such institutions are used to settle, facilitate, or finance international trade transactions (e.g., through the processing of wire transfers, provision of trade finance, and issuance of letters of credit and guarantees). TBML activity is considered to be growing in both volume and global reach. Although TBML is widely recognized as one of the most common manifestations of international money laundering, TBML appears to be less understood among academics and policymakers than traditional forms of money laundering through the international banking system and bulk cash smuggling. Nevertheless, TBML has emerged as an issue of growing interest in the 114th Congress, especially as Members and committees examine tools to counter terrorist financing.
The U.S. government has historically focused on TBML schemes involving drug proceeds from Latin America, particularly the Black Market Peso Exchange (BMPE). Although a number of anecdotal case studies in recent years have revealed instances in which TBML is used by known terrorist groups and other non-state armed groups, including Hezbollah, the Treasury Department's June 2015 National Terrorist Financing Risk Assessment concluded that TBML is not a dominant method for terrorist financing.
The United States is combating TBML in a number of ways:
The Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issues advisories and geographic targeting orders and applies special measures to jurisdictions determined to be of primary money laundering concern.
The United States is also an active participant in the intergovernmental Financial Action Task Force (FATF), created in 1989 to develop and promote guidelines on anti-money laundering and combating the financing of terrorism (AML/CFT). FATF has addressed TBML methods and best practices to combat TBML in periodic reports and mutual evaluations of its members.
The U.S. Department of Homeland Security (DHS), through its Immigration and Customs Enforcement's Homeland Security Investigations (ICE/HSI) unit, maintains a Trade Transparency Unit (TTU) in Washington, DC. The TTU has U.S. Department of State funding and Treasury Department support. DHS has since developed a network of counterpart TTUs in almost a dozen countries abroad. The TTUs examine trade anomalies and financial irregularities associated with TBML, customs fraud, contraband smuggling, and tax evasion.
This report discusses the scope of the TBML problem and analyzes selected U.S. government policy responses to address TBML. It includes a listing of hearings in the 114th Congress that addressed TBML.
