Transfer Pricing-Based Money Laundering in Barter Trade

Abstract

Barter trade attracts money launderers by its flexible contract, payment term of reciprocal letters of credit, and convenient capital flight and tax evasion. As far as fair value and invoiced value of the transacted goods are concerned, transfer price-based money laundering in barter trade is done by the means of deflated import-inflated export, inflated import-deflated export, deflated import-deflated export, and inflated import-inflated export, where the money laundered can be measured by capital flight, income tax evasion, import duty evasion, and VAT refund evasion in each case. So we should reinforce transaction supervision, promote intelligence exchange, perfect relative regulations, and improve anti-money laundering awareness and capabilities.

Transfer Pricing in V4 Countries

“…Bateman (2007) presents an ethical decisionmaking model for transfer pricing application. Mei and Li (2015) investigate transfer pricing-based money laundering in barter trades and provide an overview of the methods against trade-based money laundering.…”

China’s dirty laundry – international organizations posing a risk to China’s AML systems

“…Tvind has been accused of owning all the different organizations participating in the used clothing business, allowing them to inflate the value of the clothes in a common money laundering technique known as "transfer pricing" or "transfer mispricing". (DeLuca, 2014) Transfer pricing is often associated with trade-based money laundering techniques (Mei and Li, 2015) and is based on the false declaration of the value of goods to move money undetected from one company or jurisdiction to another. In the Tvind case, the constant movement of goods between their own controlled organizations provided an ideal cover for integrating funds and disguising their origins (DeLuca, 2014).…”