A new report has said that increasing public and private sector partnership can help solve the problem of trade based money laundering.
Trade based money laundering is the process of disguising the proceeds of crime and moving value using trade transactions to legitimize their illegal origins. A study by Global Financial Integrity estimates that trade based money laundering to and from developing and emerging economies was between 14 and 24 percent of their total trade from 2005 to 2014. That makes it more than a trillion-dollar problem – not counting the potential damage done using the illicit funds.
The paper, called Combatting Trade Based Money Laundering – Rethinking the Approach, seeks to clarify bank-intermediated trade and banks’ ability to intercept illicit activity. It also explores ways that broader international trade stakeholders from both the private and public sectors can better align to help reduce trade based money laundering and terrorist financing without hindering international commerce and economic growth.
“Some have likened trade based money laundering not to looking for a needle in a haystack, but rather, looking for the bad needle in a stack of needles,” said Tod Burwell, president and CEO of BAFT, the global financial services association for international transaction banking that developed the report.
“That’s why it is so important to get all stakeholders involved in international trade working together to thwart financial crime,” Burwell added.
The BAFT working group that developed the paper includes compliance, risk and product management experts from 14 financial institutions from the United States, Canada, Europe and Asia.