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FATF Highlights the Increasing Risk of Trade-Based Money Laundering

FATF- Financial Action Task Force is warning businesses of the risk they face regarding trade-based money laundering. Criminals have found new ways to launder money through the export of onions, potatoes, fruits, cars, etc.

FATF’s president, Marcus Pleyer, has declared laundering of money through trade a new kind of fraud. According to FATF, this type of crime has enabled criminal organizations to launder over $400 million in several years.  

According to a news report, there are four different kinds of trade-based financial crimes. 

  • There is the tampering of invoices of the goods. Prices are mislabeled to transfer value. 
  • There are phantom shipments where nothing moves in real. 
  • The documents of the goods’ trade are reused several times with multiple invoices. 
  • Then there is another trick where the quality of the goods is under described to transfer value. 

A risk assessment was carried out by the U.K and according to them, the COVID-19 pandemic has also increased the risk of money laundering as there is a spike in demand for goods and services required to fight the virus. 

FATF has also warned that the bad actors are involved in the transactions of pharmaceuticals, textiles, and other equipment. Money laundering has always been an alternative to the conventional form of crime as it has become harder to pull off such crimes. Shell companies are used for most of the trade-based money laundering. Some legitimate businesses are also involved which results in criminal investigation and bad reputation. 

Money laundering is the process of turning illegal funds into legal income so that it can be used without an investigation. However, with digitization, both the crime and the means to fight has been moved to the internet.