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Money laundering is a major global issue that has a severe impact on national and global economies. According to the World Trade Organization, money laundering operations deal with trillions of dollars annually with trade-based money laundering being a particularly challenging area to tackle.


What is Money Laundering?

Money laundering is the process of converting or “washing” money earned from any illegal activities into legal and “clean” money that does not have to be concealed from authorities and used in legitimate business operations. Trade-based money laundering is the use of trade activities and transactions to transfer illegally obtained money into legitimate or less suspicious commodities.


Trade-Based Techniques

Trade-based money laundering capitalizes on the complexity of trade, especially when it comes to importing and exporting. There are a number of commonly used tactics that financial criminals utilize:


Over-and under-invoicing: The most common tactic where the exporter sets a lower price so that when the importer sells on the market the value will be higher.


Multiple-invoicing: Multiple invoices are sent for the same shipment so that greater value is transferred from importer to exporter.


Changing quantity: Changing the quantity of goods shipped to transfer greater value to the importer/exporter.


Using Tech to Stop Laundering

These are a few of the main strategies that are used when it comes to trade-based money laundering and they can be hard to identify. Fortunately, tech can help and will play a major role moving forward in preventing money laundering. This is through the use of analytics technology that can be used to monitor and detect suspicious trade activities. This technology can inspect the volume, speed and discrepancies in trade actives with the use of statistical tools for profile analysis. This can also help business leaders to ensure that they are operating above board.


Collaboration Between Banks

In addition to this, tech is also now being used to help banks to work together to prevent trade-based money laundering. Singapore’s central bank has announced a digital platform that will allow banks to share customer and transaction data to detect money laundering. Using different banks is a common strategy for money laundering, so collaboration is key and this will be made much easier with this digital platform that is currently set for a 2023 release date.


Money laundering is a serious global issue that is having a major impact on national and global economies, which is particularly damaging in the current situation as a result of COVID-19. Fortunately, tech is helping with the battle against money laundering and this will help banks to clamp down on financial crime in the years to come.