Remarks at the launch of the FATF-Egmont Group Report on Trade-Based Money Laundering
FATF President, Dr Marcus Pleyer
9 December 2020.
Hello everybody, thank you for joining us.
I am Marcus Pleyer, the President of the Financial Action Task Force, the FATF, which is the global watchdog on money laundering and terrorist financing. The FATF researches how money is laundered and terrorism is funded; we set global standards to mitigate those risks; and we assess the effectiveness of actions that countries take.
Here today, we want to present you the report on FATF/Egmont Trade-based Money Laundering: Trends and Developments. I would like to thank the Egmont Group of Financial Investigation Units, FIUs, who co-authored this report with us. In particular, Hennie Verbeek-Kusters, the Chair of the Egmont Group, who is with us today.
Thank you also to Kevin Newe from the United Kingdom - one of the co-leads driving this project and who works for UK Customs - and Zhen Cai from the German FIU, who also led the work on the project for the Egmont Group.
I want to highlight some of the key elements of the report.
As we all know, money laundering goes hand-in-hand with organised crime. It allows criminals to make illicit cash appear legitimate. So money from drug trafficking or people trafficking, for example, can be laundered into the global financial system.
Historically, there have been three main ways of doing it:
- One is to transfer dirty money through banks or other financial institutions.
- The second one is, to move illicit funds physically via cash couriers.
- And the third one is to use international trade to move and disguise the proceeds of crime.
And this is what it is about today. The third one – Trade-Based Money Laundering, or TBML for short .
Trade-based money laundering exploits the international trade system. It allows criminals to disguise their illicit proceeds alongside legitimate international trade and move it between countries. This makes it extremely hard for authorities to detect.
I want to give you an example scenario. Foodstuffs are highly perishable goods. They are ripe for multiple invoicing.
Say a professional money-laundering network uses food import/export companies to clean a drug cartel’s dirty money.
There are various methods, but for example: the money launderers could ship fewer goods than stated in a contract.
They could price the goods above their market value.
They could even not send the goods at all, but supply invoices.
Any of these methods would allow them to launder money.
For example, in the case of overpaying massively for a product – they could have falsified invoices. This can make it appear like a proper and fair business transaction – even though it is not.
That is a simple outline of how it can work but it can be much more complex. For example, by using third-party bank accounts and shell companies.
It is clear , professional money launderers use international trade to disguise dirty money. This helps fuels serious crime and terrorism. It facilitates corruption and hampers competition.
A concrete example referenced in our report suggests that one criminal network – just one! – using TBML and other techniques, was able to move 400 million US dollars over several years. It gives you an idea of the scale of the issue.
Today’s report builds on earlier work and outlines ways to identify and tackle trade-based money laundering. This includes the use of better and closer public-private sector partnerships; detailed money laundering risk assessments; and the use of advanced IT systems to detect suspicious activity.
By taking these actions, countries can disrupt the underlying criminal business models that enables crime and terrorism.
Countries need to recognise the importance of this issue. This is about taking away the economic motives for serious crime, drugs and arms trafficking, environmental crime and much more. If countries take action, we can make money laundering through trade too risky, too complicated, and in the end unprofitable.
With this I will finish my introduction and hand over to Hennie Verbeek-Kusters, to say a few words.