A financial service provided by banks or financial institutions to exporters in order to fund the purchase of raw materials and production costs before goods are shipped. This service supports businesses in managing cash flow during the production phase of a trade cycle.
Main/
Pre-Shipment Finance
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Code
PS0053
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Name
Pre-Shipment Finance
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Version
1.0
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Category
Lending & Credit
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Created
2025-03-14
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Modified
2025-04-02
Related Techniques
- Criminals fabricate or inflate purchase orders and invoices to secure funds before goods are shipped, then divert proceeds.
- The mismatch between financed invoices and actual or non-existent shipments obscures the true origin of funds.
- Criminals secure financing for falsely valued or fictitious goods prior to shipment, diverting funds derived from misrepresented invoices.
- The reliance on projected sales and self-reported supply data provides openings for layering illicit proceeds through trade documentation irregularities.
- Fraudulent exporters obtain funds for raw materials and production on the basis of forged purchase orders and pro-forma invoices.
- The bank disburses funds for goods that are never produced or shipped, facilitating disguise and layering of illicit proceeds.
- Criminals submit falsified export orders, pro forma invoices, or shipping details to obtain short-term funding before any actual goods are dispatched.
- Once the loan is issued, illicit funds are funneled back as alleged export proceeds to repay the financing, making the criminal funds appear legitimate.
- In many cases, no real shipment takes place, or the shipment is significantly smaller than what the paperwork reflects, enabling the layering of illegal funds into normal trade flows.
- Offenders apply for pre-shipment loans by forging or inflating purchase orders or production needs.
- The advanced funds are diverted away from genuine shipping or manufacturing expenses, masking illicit origins under the cover of pre-export financing.
- Fraudsters submit false or exaggerated shipping and production documents to secure advance funding for goods that are never actually produced or shipped.
- The advanced financing is subsequently repaid with illicit funds, giving the appearance of lawful trade revenue.
- Green clause letters of credit function as a form of pre-shipment finance, covering production costs before goods are actually shipped.
- Criminals inflate anticipated production expenses or fabricate orders, justifying larger upfront disbursements.
- These improperly obtained funds can then be rapidly distributed to conceal or integrate illicit gains, leveraging the legitimate appearance of pre-shipment financing.
- Fraudulent pre-shipment funding is obtained using falsified purchase orders and pro forma invoices that overstate production or export quantities.
- After receiving funds, minimal or no actual goods are shipped, creating a discrepancy that hides illicit proceeds.