Reaching Beyond Banks: How to Target Trade-based Money Laundering and Terrorist Financing Through Preventive Measures Outside the Financial Sector


Our thesis is that all those in the supply chain - exporters, importers, freight forwarders, carriers - should be subject to anti-money laundering/counter-terrorist financing (AML/CFT) preventive measures such as customer due diligence, record-keeping, appointment of a compliance officer and filing of suspicious activity reports or SARs.

AML/CFT measures have succeeded in restricting the two traditional avenues of money laundering, namely, the abuse of financial intermediaries and the physical movement of money across borders. Consequently, international criminal and terrorist organizations have turned to trade-based money laundering (TBML) to conceal and legitimize their funds, as this is a channel that remains relatively untouched by AML/CFT efforts internationally.

This abuse of the global trade network has received increasing recognition from the Financial Action Task Force, the international standard-setter, as the next front in AML/CFT. Because TBML methods may be used not only to launder money, but also to finance international terrorism, to facilitate weapons proliferation, and to conceal and transport weapons of mass destruction (WMDs), this article proposes a far-reaching solution — that those in the international supply chain be required by law to adopt AML/CFT safeguards to protect their businesses, including filing suspicious activity reports, identifying their customers, and designating an AML/CFT compliance officer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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