Free Trade Zones

By conducting repeated re-exports, over- and under-invoicing, and other trade-based maneuvers within Free Trade Zones (FTZs), criminals create complex cross-border transaction chains that obscure the original illicit source of funds.

Criminals exploit the specialized legal frameworks and lenient regulatory environments in free trade zones and special economic zones. They take advantage of minimal AML oversight, relaxed customs processes, and reduced disclosure obligations to obscure beneficial ownership and transaction details. By engaging in over- or under-invoicing, repeated re-exports, and storing high-value assets in freeport facilities with minimal transparency, they leverage these zones’ jurisdictional loopholes to layer illicit funds and complicate cross-border AML investigations.

• Provides official data on the cross-border movement of goods, including shipping routes, tariffs, and declared items.
• Facilitates the confirmation of actual import/export activities in free trade zones versus declared trade documentation.
• Helps detect repeated re-exports or suspicious cargo volumes that may indicate layering within FTZs.

• Provides reference prices, historical trends, and valuation benchmarks for various commodities.
• Enables comparison of declared goods' prices against realistic market values to spot over- or under-invoicing.
• Helps validate the plausibility of trade transactions executed in free trade zones.

• Contains transaction invoices, payment terms, parties involved, and invoice identifiers.
• Enables verification of contract specifics (e.g., quantities, prices, contractual obligations) in free trade zone deals.
• Assists in identifying over- or under-invoicing practices common in FTZ trade-based money laundering.

• Captures timestamps, amounts, parties, and currency details for transactions flowing through free trade zone accounts.
• Highlights large, round-sum, or structured transactions inconsistent with the stated business activities.
• Reveals spikes or patterns of layering within FTZ-linked accounts compared to normal volume.

• Includes shipping logs, customs declarations, bills of lading, invoices, and certificates of origin related to FTZ transactions.
• Enables detection of over- or under-invoicing, repeated re-exports, and discrepancies in declared cargo.
• Validates whether goods actually enter or leave the free zone or simply circulate to mask the true flow of funds.

• Provides verified identities, beneficial ownership details, and address information for entities established in free trade zones.
• Enables detection of shell or non-operational companies by verifying declared business activities, physical premises, and source of funds.
• Supports ongoing monitoring to identify unverified ownership changes in FTZ entities.

• Provides details on ownership, purchase, and transfer of high-value assets stored or traded in freeports.
• Identifies prolonged storage, beneficial owners of valuable items (e.g., artwork, precious metals), and minimal disclosure patterns.
• Supports investigations into concealed ownership and suspicious asset movements within free trade zones.

• Contains detailed records of commodity trades, including quantities, dates, parties, and prices.
• Validates the legitimacy of buy/sell patterns and repeated shipments in FTZs.
• Aids in detecting contrived trade cycles or inflated/deflated pricing schemes used for layering illicit funds.

• Captures information on cross-border payments, correspondent banking relationships, and involved jurisdictions.
• Highlights unusual payment flows and layering across multiple countries when funds pass through FTZs.
• Provides details to confirm whether declared routing aligns with legitimate business needs.

• Contains official information on corporate registration, shareholders, directorships, and ownership structures.
• Enables verification of overlapping or rapidly changing beneficial owners across multiple FTZ entities.
• Helps uncover hidden relationships indicative of shell structures or illicit layering.

Conduct thorough verification of companies operating in free trade zones by cross-referencing free zone registry data, confirming the physical existence of sites, and verifying beneficial ownership for any high-value assets stored in freeport facilities. These steps ensure that shell or paper entities are not exploiting the relaxed oversight environment to conceal illicit funds.

Implement automated triggers for cross-border transactions involving free trade zones, flagging round-sum transfers, abrupt spikes in activity, or repeated transactions just below threshold reporting requirements. Correlate financial transfers with trade documentation to expose layering across FTZ channels.

Leverage public registries, shipping logs, corporate records, and other external data to validate the legitimacy of free zone businesses and confirm the ownership or existence of high-value assets stored in freeports. Such verification uncovers nominee structures, undeclared beneficial owners, and contrived trade flows intended to obscure illicit proceeds.

Systematically compare declared goods and invoice values in free zone transactions against prevailing market rates and shipping records. Pay special attention to repeated re-exports with suspiciously inflated or deflated pricing. This helps detect trade-based money laundering schemes leveraging over/under-invoicing and cyclical trade flows in FTZs.

• Documents like letters of credit and bills of lading are falsified or manipulated to inflate or deflate the declared value of goods in FTZs.
• Relaxed oversight and simplified customs processes enable repeated re-export or re-invoicing, integrating illicit proceeds among legitimate trade flows.
• Shell entities within FTZs orchestrate these paperwork manipulations, making it difficult for investigators to track the true movement of funds.

• Freeport facilities in FTZs allow for the indefinite storage of high-value art with minimal disclosure of owners or transaction details.
• Criminals move these assets across borders or repeatedly re-export them at varying valuations, layering illicit funds under legitimate trade documentation.
• The specialized art market and lack of robust AML measures in FTZs further conceal true ownership and the origin of funds.

• Criminals create inflated or fictitious invoices for goods supposedly traded in FTZs, recording them as receivables to legitimize incoming funds.
• Over-/under-invoicing repeated across multiple shipments disguises the true origin of money, weaving illicit proceeds into routine trade transactions.
• Weakened corporate transparency in FTZs masks the real parties behind these invoices, complicating AML monitoring efforts.

• Shell companies in FTZs over- or under-invoice luxury items (e.g., high-end watches, designer products), making illicit funds appear as legitimate trade proceeds.
• Minimal customs and transaction disclosure requirements allow repetitive cross-border shipments at manipulated values, layering illicit money through multiple jurisdictions.
• Opaque ownership structures within these zones obscure the true owners of high-value merchandise, thwarting AML investigations.

• Manipulating shipping routes, cargo descriptions, and supporting documentation within free trade zones allows criminals to mask illicit activities.
• Repetitive, non-economic shipping patterns (“round-tripping”) and discrepancies in cargo manifests are often used to disguise the movement of illicit funds.

• Criminals leverage trade finance instruments (e.g., invoices, letters of credit) in free trade zones to manipulate the declared value of goods and repeatedly re-export them, concealing the true origin of funds.
• These over- or under-invoiced transactions obscure payment trails and hinder AML detection.

• Assistance with business licensing, customs processes, and tax exemptions within free trade zones may be exploited to avoid stringent AML measures.
• Lenient oversight in these specialized zones enables layering of illicit funds through complex or opaque trade transactions.

• Criminals can store high-value art or collectibles in freeport facilities with minimal disclosure requirements.
• This limits visibility into the ultimate beneficial owner and masks asset transfers under the pretext of legitimate storage.

• FTZs often overlap with offshore jurisdictions or offer similar benefits, such as minimal financial disclosure.
• Incorporation in these regions lets criminals manage shell entities with reduced AML scrutiny, enabling disguised cross-border fund movements.

• Criminals form and administer shell companies in FTZs to obscure beneficial owners.
• Nominee structures and limited transparency facilitate under- or over-invoicing and repeated trade transactions, catering to complex layering schemes.

Criminals use shell or front companies in free trade zones to:

• Undertake over- or under-invoicing, repeated re-exports, and other manipulated trade transactions that blend illicit proceeds with legitimate trade.
• Conceal beneficial ownership behind complex incorporation structures, making it difficult for financial institutions to identify ultimate controllers or verify the true value of transactions.

This deliberate opacity enables systematic layering of illicit funds and frustrates standard AML controls.