Trade-Based Money Laundering (TBML) is one of the most complex and challenging forms of financial crime that federal authorities investigate. It involves using trade transactions to disguise the origins of illicit funds and integrate them into the legitimate financial system.

If you're currently under the shadow of TBML suspicions or accusations, you're in a precarious situation. The potential federal criminal charges you could face are not to be taken lightly, as they could lead to significant prison time if proven guilty.

TBML means disguising the proceeds of a crime and moving value using cross-border trade transactions to legitimize their illicit origins.

Trade-based money laundering is not just a problem of the past; it's a growing risk. Seemingly legitimate transactions are increasingly exploited by criminal groups to launder funds and finance terrorist activity. This trend underscores the need for heightened vigilance and understanding of TBML.

In simple terms, trade-based money laundering is the process of making illegal money look legal by manipulating the value, quantity, or nature of goods and services in trade transactions.

TBML involves exploitation of the international trade system to transfer value and obscure the true origins of illicit wealth. The schemes vary in complexity but typically involve misrepresenting the price, quantity, or quality of imports or exports.

Criminal organizations and terrorist financiers move money to disguise its origins and integrate it into the formal economy using three main methods. The first is through the financial system. The second involves the physical movement of money (e.g., through the use of cash couriers). The third is through the physical movement of goods through the trade system.

In recent years, the Financial Action Task Force has focused considerable attention on the first two of these methods. By comparison, the scope for abuse of the international trade system has received relatively little attention.

How TBML Works

At its core, TBML is the process of moving illegal money through trade to make it appear legitimate. It often involves manipulating trade transactions, such as imports and exports, to misrepresent the value, quantity, or nature of goods and services.

This manipulation creates opportunities to transfer illicit funds across borders or hide them within seemingly lawful business dealings.

TBML is particularly sophisticated, relying on genuine trade systems and documentation. Unlike other forms of money laundering that involve direct cash transactions or digital wire transfers, TBML thrives in the sprawling and often opaque realm of global commerce, making it a complex and challenging issue to tackle.

Since billions of dollars flow through international trade daily, identifying illicit transactions within legitimate ones can be extremely challenging for law enforcement.

The international trade system is clearly subject to a wide range of risks and vulnerabilities that criminal organizations and terrorist financiers can exploit. These arise, in part, from the enormous volume of trade flows, which:

• Obscures individual transactions,
• The complexities associated with the use of multiple foreign exchange transactions and diverse trade financing arrangements,
• The commingling of legitimate and illicit funds, and
• The limited resources that most customs agencies that are available to detect suspicious trade transactions.

In practice, this can be achieved through the misrepresentation of the price, quantity, or quality of imports or exports. Moreover, trade-based money laundering techniques vary in complexity and are frequently used in combination with other money laundering techniques to obscure the money trail further.

What are the Common Tactics?

Let's delve into some of the common tactics used in trade-based money laundering. These tactics are not just theoretical; they're the tools of the trade for those looking to make illegal money look legal.

• Over and Under-Invoicing: This occurs when traders intentionally misstate the price of goods or services. For instance, over-invoicing involves exaggerating the value of goods on an invoice, providing an excuse to move larger amounts of money than the goods are actually worth. Under-invoicing works in the opposite way, understating prices to pay duties or tax on a smaller declared value.
• Multiple Invoicing of Goods: Parties involved in laundering may create several invoices for the same shipment, effectively laundering money under the guise of multiple transactions.
• Misrepresentation of Quality or Quantity: Criminals might falsify records to reflect false quantities or describe substandard goods as premium to justify the transfer of funds.
• Phantom Shipping: Perhaps the most straightforward tactic, this involves documentation for shipments that never actually took place.
• Repeated importation and exportation of the same high-value commodity, known as carousel transactions.
• Misuse of existing trade chain to move funds for terrorists (evasion of sanctions/financing of terrorism).

EXAMPLE 1: A clothing manufacturer in Country A exports a shipment of garments to a retailer in Country B. The invoice, however, lists the value of the shipment as $1 million, even though the actual market price of the goods is only $500,000. The additional $500,000 represents illegal funds, masked to appear as part of the transaction. Once the retailer "pays" the $1 million, the excess money is effectively laundered through the trade channel and appears legitimate.

EXAMPLE 2: The Black-Market Peso Exchange is another example of a more complex TBML scheme used by Central and South American drug cartels to launder drug proceeds generated in the United States. Other examples include using shell companies to inflate the value of goods or services, or manipulating trade finance instruments to move illicit funds.

How TBML is Criminally Charged

Trade-based money Laundering isn't a charge in itself. Instead, federal prosecutors use a mix of statutes to go after TBML, including:

• 18 U.S.C. 1956 (Money Laundering) - Involves conducting financial transactions with proceeds of specified unlawful activity (SUA).
• 18 U.S.C. 1957 (Monetary Transactions in Property Derived from SUA) - Criminalizes spending more than $10,000 of illegally obtained funds.
• Conspiracy (18 U.S.C. 371 or 1349) - If two or more people agree to commit money laundering or fraud.

Convictions under these statutes can result in up to 20 years in prison per count and fines of up to $500,000 or twice the value of the transaction, whichever is greater.

Companies involved in TBML schemes can face crippling financial penalties or forfeiture of assets. These consequences can have a significant impact on your personal and professional life, making it crucial to mount a strong defense against TBML charges.

What makes TBML tricky is that it often crosses into other areas like customs fraud, wire fraud, and tax evasion. This gives prosecutors a wide net to charge defendants with multiple felonies.

How a Federal Defense Attorney Can Help

Money laundering continues to be a significant concern in the U.S. and globally-because it facilitates and disguises the proceeds of crime, can alter markets, and has broader implications for financial systems.

If you're under investigation or facing charges related to TBML, working with an experienced federal criminal defense attorney is vital. TBML cases are highly technical and require an in-depth understanding of financial transactions, trade regulations, and money laundering laws.

A skilled attorney can help you navigate the complex legal system, protect your rights, and build a strong defense strategy. Here's how an attorney can help:

• Analyze the Allegations: Your attorney will carefully examine the evidence against you, including trade records, invoices, shipping documents, and financial statements, to identify any gaps, inconsistencies, or weak points in the prosecution's case.
• Challenge Evidence: TBML investigations often involve extensive data collection by authorities. If evidence was obtained improperly, such as during an unlawful search or seizure, your attorney can move to suppress it.
• Build a Strong Defense Strategy: A skilled defense lawyer can argue that discrepancies in trade documentation are due to errors, misunderstandings, or legitimate business practices rather than deliberate attempts to launder funds. They can also demonstrate the absence of intent to commit a crime, which is often a key element in federal cases.
• Negotiate with Prosecutors: Depending on the circumstances, your lawyer may advocate for reduced charges, negotiate plea agreements, or pursue case dismissal.

For more information, contact Eisner Goring LLP, a federal criminal defense law firm located in Los Angeles, California.

Related Content:

• Trade-Based Money Laundering
• Financial Action Task Force
• Black-Market Peso Exchange
• Federal Money Laundering Defense Lawyer