Trade-based money laundering: a systematic literature review

Abstract

PurposeThis paper aims to offer the first known synthesis of peer-reviewed literature on trade-based money laundering (TBML). Given the topic is in its nascent stage yet gaining prominence across scholarship and practice, this foundation is pertinent for future TBML research.Design/methodology/approachA systematic literature review was undertaken with a formulaic search string. Both qualitative (thematic) and quantitative (meta) analysis methods were used to illustrate the findings.FindingsThe systematic literature review, using qualitative and quantitative synthesis, led to a thematic categorization of extant TBML literature into four categories: TBML risk assessment, TBML detection, the role of professionals and understanding of TBML. Due to the limited number of studies, insights that can be drawn from the extant literature on the best way to combat TBML are also limited.Originality/valueAs the first systematic literature review on TBML, this study identified that the existing TBML literature has focused on increasing the understanding of the phenomenon in terms of its definition and mechanisms, detection, linkage with other crimes, such as organized crime and terrorism financing, and risk assessment frameworks. The originality of these findings lies in identifying areas future researchers might explore to broaden the academic literature.

The role of freight forwarding companies in detecting and investigating trade-based money laundering

“…Legitimate international trade systems can be used to move dirty money by misrepresenting the price, quality or type of goods using falsified documentation (Raza and Weirauch, 2021). Techniques by which TBML can be perpetrated include the under- and over-invoicing, over- and under-shipment of goods, multiple invoicing, ghost invoicing and falsely described goods and services (Tiwari et al. , 2024).…”

“…The measurement of trade mispricing refers to the bilateral discrepancies in trade data when comparing partner-country reported trade statistics (UNCTAD, 2021). The measurement compares the average world price to the average country price for every product (Tiwari et al, 2024). GFI quantified the average annual value gaps between South Africa and their trade partners from 2010 to 2014 as US$7.3bn (GFI, 2018).…”

“…International trade platforms make money laundering an enticing option, especially in countries with a high risk of capital flight, where political and economic turbulence are present (Schlenther, 2016). The increased focus on detecting financial crimes through various institutions has given rise to perpetrators exploring illegal options, like TBML, outside the financial systems (Tiwari et al. , 2024).…”