Trade Diversion

Trade diversion leverages complex shipping routes, multiple intermediaries, and falsified trade documentation to create numerous transactional layers that obscure the link between illicit funds and their criminal source. By intermixing legitimate and illicit goods and payments across various jurisdictions, this technique makes it significantly harder for investigators to trace and attribute the proceeds.

Criminals manipulate trade finance instruments (e.g., letters of credit, invoices, bills of lading) to misrepresent shipments and disguise the movement of illicit funds. The complexity of these products and documentation processes allows for hidden layering and supports the misreporting of values or goods in trade diversion schemes.

Trade diversion fundamentally exploits cross-border vulnerabilities by rerouting shipments through multiple countries with inconsistent AML controls. Criminals leverage the differences in customs regimes, enforcement thresholds, and disclosure requirements, obscuring the origin, value, or ultimate recipient of illicit proceeds across various regulatory environments.

Comprehensive records detail cross-border shipment movements, including declared cargo, tariffs, and inspection details. By tracking actual shipping routes, comparing declared contents with customs filings, and reviewing inspection outcomes, investigators can identify suspicious diversion patterns, hidden intermediaries, or inconsistent documentation indicative of illicit trade activity.

Provides risk assessments and enforcement records tied to specific regions or jurisdictions, identifying high-risk ports or countries. Flags unusual trade routes that deviate from normal patterns, helping to narrow down potential diversion schemes.

Offers current and historical commodity pricing, enabling the comparison of declared prices against prevailing market rates. Detects overvaluation or undervaluation of goods, a common tactic in trade diversion to disguise illicit value.

Includes bills of lading, shipping logs, cargo descriptions, customs declarations, and other official trade paperwork. Cross-referencing these details can reveal inconsistent routes, mislabeling of goods, or last-minute changes that signify trade diversion.

Contains verified customer identities, beneficial ownership data, addresses, and risk profiles. Investigators can identify potential shell companies or disguised beneficial owners orchestrating illicit trade diversion. Supports direct review of the customer's ultimate beneficiary and final destination claims for shipped goods.

Provides official or aggregated entity registration details, including beneficial ownership, directors, and historical registrations. Enables detection of newly formed or dormant companies, suspicious freight forwarders, or other unverified intermediaries associated with trade diversion schemes.

Apply more rigorous checks on customers or beneficiaries engaged in multi-jurisdictional trade or frequently altered shipping routes. Verify beneficial owners and their business registrations to ensure no shell or front companies are involved. Cross-check the licensing and regulatory status of intermediaries and trading partners to uncover suspicious ownership layers that facilitate trade diversion.

Incorporate specialized scenarios and analytics for trade finance that link financial flows to corresponding shipping documents. Flag payments or letters of credit that do not align with expected shipment timelines, cargo values, or known trading corridors. By correlating payments with actual shipping events, institutions can detect layering strategies that rely on trade diversion to disguise the flow of illicit funds.

Continuously assess freight forwarders, customs brokers, and other logistics partners involved in intricate shipping networks. Review ownership structures, operational licenses, and prior regulatory issues to identify undisclosed relationships or front entities. Mandate contractual clauses requiring transparent reporting of shipping routes and any diversions, enabling the institution to pinpoint hidden or suspicious re-routing in near real-time.

Provide specialized instruction for trade finance personnel to recognize re-routed shipments, forged shipping documents, and undervalued invoices. Illustrate red flags such as last-minute changes in transit points or final destinations that are inconsistent with typical trade patterns. By sensitizing staff to the hallmarks of trade diversion, institutions promote early detection and intervention.

Use maritime databases, port registries, and other external resources to confirm actual shipping routes, cargo details, and counterparties. Cross-reference vessel tracking data with declared shipping manifests to detect inconsistencies, such as unexpected transshipment points or falsified documents. This tactic counters trade diversion by revealing deviations from declared shipping itineraries that conceal the true origin or recipient of the goods.

Establish secure channels to share intelligence on emerging trade diversion typologies and re-routing patterns with industry peers and relevant authorities. Compare identified anomalies, such as repeated mislabeling of cargo or suspiciously circuitous shipping routes, to disrupt complex cross-border schemes. Coordinated insights help reveal multi-institution layering attempts concealed within trade networks.

Implement specialized scrutiny of shipping documents and routes to detect re-routed or misdescribed cargo used in trade diversion. Cross-check bills of lading, invoices, and container manifests for inconsistencies in declared value, shipping origins, or final destinations. Use commodity and market data to identify price anomalies, ensuring that cargo values match legitimate market rates. By comparing declared and actual shipping details, institutions can expose manipulated trade flows designed to obscure illicit proceeds.

• Shell or front companies maintain accounts in various jurisdictions to receive payments tied to falsified trade documentation, commingling illicit proceeds with legitimate commercial flows.
• Cross-border transfers between these accounts appear as normal trade settlements, yet actually facilitate large-scale layering of misrepresented funds.

• Trade diversion exploits letters of credit by presenting falsified shipping and cargo documents to financial institutions, triggering payments for what appear to be legitimate shipments.
• Because banks rely heavily on documentation, the real origin, destination, or value of goods remains obscured, aiding in layering illicit proceeds.

• Encompasses instruments such as bills of lading and other trade documentation that criminals alter or forge to disguise cargo details, final recipients, or shipment routes.
• By leveraging multiple jurisdictions and intermediary firms, criminals embed illicit transactions within seemingly standard trade processes, complicating AML efforts.

• Criminals falsify or manipulate commercial invoices to misrepresent the value or quantity of goods, funneling illicit funds under the guise of legitimate trade transactions.
• These invoiced amounts align with rerouted or fictitious shipments, hindering authorities from distinguishing genuine deliveries from those masking illicit proceeds.

• By re-routing shipments through unexpected intermediaries, criminals hide the final destination or origin of illicit goods.
• Falsified shipping manifests and logistical details blur the trail back to the true source, impeding authorities’ ability to link products to criminal proceeds.

• Falsified commercial invoices, bills of lading, or certificates of origin are used to obscure the real nature, value, or destination of goods.
• By altering documentation, criminals can seamlessly mask irregularities in shipping routes and hamper law enforcement efforts.

• Criminals can falsify or manipulate import/export invoices and other underlying documents, disguising the true nature or recipient of funds.
• By over- or under-invoicing goods, they legitimize large transactions under the pretense of genuine trade.
• Exploiting complex trade finance instruments (e.g., letters of credit) creates layers that obscure beneficial ownership and hamper AML efforts.

• Criminals manipulate or omit cargo details and supporting documentation through customs brokerage and cross-border coordination.
• Leveraging free zones or laxer regulations in certain jurisdictions, they add extra layers of complexity that obscure the actual value and beneficiaries of transactions.

• Criminals establish shell or front companies in multiple jurisdictions, serving as importers, exporters, or intermediaries to conceal true ownership.
• These legal arrangements facilitate advanced layering of transactions, making trade routes, participants, and financial flows harder to trace.

Organized crime groups orchestrate trade diversion to launder significant amounts of illicit proceeds. They:

• Coordinate multi-jurisdictional shipping routes and documentation to obscure the origin of funds.
• Exploit seemingly legitimate trade flows, making it difficult for financial institutions to detect irregular patterns among numerous cross-border transactions.

Import-export companies, including those acting as trade intermediaries, facilitate trade diversion by:

• Routing shipments through multiple jurisdictions and producing or accepting misleading trade documentation.
• Allowing transactions that closely mimic legitimate commercial operations, making suspicious activity harder for financial institutions to detect.

Professional money launderers design and execute complex trade diversion frameworks by:

• Structuring multi-layered transactions and leveraging fraudulent shipping or financial documents.
• Concealing beneficial ownership, which hampers financial institutions' due diligence and monitoring of cross-border trade transactions.

Document forgers supply fake or altered trade documents, such as bills of lading or commercial invoices, that:

• Legitimize misrepresented shipments and invoices affecting cross-border payments.
• Deceive financial institutions relying on these documents to process trade finance or clearing transactions, thereby obscuring the true origin and value of funds.

Shell or front companies often appear as importers or exporters in trade diversion schemes. They:

• Mask the connection between illicit proceeds and their criminal sources by showing only routine commercial activity.
• Complicate financial institutions’ verification efforts when accounts, invoices, and shipping records appear consistent with normal trade finance patterns.

Criminals exploit shipping and logistics companies by re-routing cargo and creating multiple stops that:

• Hide the final destination or origin of goods, confusing standard trade tracking.
• Present seemingly valid shipping invoices and payment records, complicating financial institutions’ screening for illicit trade flows.