Trade-Based Money Laundering (TBML)
Definition
A typology that uses international trade transactions to transfer value across borders. Mechanisms include over-invoicing or under-invoicing goods, falsifying quantities or descriptions, multiple invoicing for the same shipment, and phantom shipments. TBML exploits the complexity and volume of global trade to make illicit transfers appear to be routine commercial settlements.
- Category
- Money laundering typology, third stage (layering/integration)
- Core mechanism
- Mis-invoicing goods or services moved across borders
- Common techniques
- Over-invoicing, under-invoicing, multiple invoicing, phantom shipments
- Detection tool
- Price-filter analysis comparing invoice price to world market price
- Overseeing body
- FATF publishes typology reports and red-flag indicators
Common questions
How do investigators actually spot TBML in trade data?+
They run price-filter analysis, comparing the unit price on an invoice against a benchmark world price range for that commodity, and flag outliers. Mismatches between the bill of lading, the letter of credit, and the customs declaration for the same shipment are another common trigger.
Why is TBML harder to detect than cash-based laundering?+
Global trade already involves legitimate price variation, complex supply chains, and multiple intermediaries, so a fraudulent invoice can hide inside normal commercial noise. There is also no single agency with full visibility across the exporting and importing customs records.
Does TBML require the goods to actually move?+
No. A phantom shipment invoice can move value through the banking system with no goods crossing a border at all, or with a container carrying different or lower-value goods than declared.
Related terms
- Integration
- The third stage, in which laundered funds re-enter the legitimate economy as apparently clean wealth. Common integration mechanisms include real estate purchases,...
- Layering
- The second stage, designed to sever the audit trail between the illicit source and the funds. Layering typically involves a rapid series...
- Placement
- The first stage of money laundering, in which illicit cash is introduced into the financial system. Methods include cash deposits, currency exchange,...
- Beneficial Owner
- The natural person who ultimately owns or controls a legal entity or arrangement, as distinct from the nominee or registered owner. Anti-money-laundering...
- Shell Company
- A legal entity with no genuine business operations, created to receive fraudulent payments. In vendor fraud, the fraudster controls the shell and...
- Smurfing (Structuring)
- Breaking a large cash sum into multiple smaller transactions, each below the mandatory reporting threshold, to avoid triggering Currency Transaction Reports or...
- Structuring (Smurfing)
- A placement-stage technique in which large cash amounts are broken into multiple smaller deposits or transactions, each deliberately kept below the threshold...
Explained in these topics
- Money Laundering: Placement, Layering, and IntegrationA method that moves value by manipulating import and export invoices, over- or under-stating prices or quantities to transfer value between parties while the t...
- Money Laundering Typologies and Audit Indicators