Pre-Shipment Finance Manipulation

By repaying the pre-shipment financing with illicit funds disguised as legitimate export proceeds, criminals effectively merge illicit capital with reputable trade transactions, completing the laundering process under the guise of successful export sales.

Criminals exploit short-term pre-shipment finance—often referred to as packing credits or working capital loans—by submitting inflated or fictitious export orders and shipping documents, which are accepted at face value as collateral. The product’s reliance on anticipated export proceeds allows them to repay these loans with illicit funds disguised as legitimate revenue, effectively merging illegal money into normal trade flows without rigorous verification of actual shipments or buyer legitimacy.

Provides official data on the cross-border movement of goods, including customs declarations, tariff classifications, and inspection results. By matching these records with financed export claims, investigators can confirm whether shipments actually occurred, exposing inconsistencies in declared quantities or values.

Offers real-time and historical pricing information for commodities, including market trends and price indices. Financial institutions can compare reported export values with established market rates to detect inflated or fictitious prices indicative of pre-shipment finance manipulation.

Includes detailed records of pre-shipment financing terms, such as loan amounts, repayment schedules, disbursement conditions, and collateral requirements. By comparing these agreements with purported export transactions, investigators can identify irregularities or inconsistencies that may indicate misuse of pre-shipment finance.

Conduct in-depth checks on exporters applying for pre-shipment finance by verifying their production capacity, export track record, and beneficial ownership. Confirm the legitimacy of the named buyers by requesting documentary proof and, if necessary, using reputable third-party verifications to detect false or inflated orders.

Monitor pre-shipment finance repayments to ensure that funds originate from the documented buyer's account and align with the expected timeline and amounts. Investigate early or third-party repayments that deviate from standard trade cycles, as these may indicate laundering of illicit funds under the guise of legitimate export proceeds.

Use public records, media sources, and external databases to verify the identity and legitimacy of the buyer, as well as the exporter’s operational capacity. Cross-check business registrations, physical addresses, and industry references to detect anomalies or non-existent entities in contracts used to secure pre-shipment finance.

Regularly validate that shipments are progressing and that final exports occur as financed. Escalate delayed or missing shipments for additional investigation to ensure that pre-shipment loans are not simply repaid with illicit funds in the absence of genuine exports.

Closely verify the authenticity of export documentation, cross-check shipping data with official sources and freight forwarders, and confirm that actual goods are produced and shipped relative to the financed sums. Identify any mismatches in shipping volumes or non-existent shipments that may indicate manipulated or fictitious orders.

• Pre-shipment financing proceeds are deposited into bank accounts controlled by criminals.
• Subsequently, illicit funds are injected into these same accounts under the guise of export payments, obscuring their illicit origin.
• By blending these transactions with regular business account activity, criminals conceal the nature of the deposited funds, effectively layering the proceeds.

• Criminals forge or overstate documents such as pro forma invoices or shipping records to obtain pre-shipment financing by misrepresenting real export transactions.
• These falsified instruments act as collateral or proof of future revenue, convincing lenders to release short-term funds.
• Once the loan is issued, criminals repay it with illicit funds disguised as legitimate export proceeds, embedding the illegal money in normal trade finance flows.

• Criminals generate inflated or fictitious invoices claiming large future sales of goods that are never shipped (or shipped in minimal quantities).
• These invoices present a false expectation of income for the bank, enabling larger pre-shipment finance approvals.
• Illicit funds are later funneled back as ‘buyer payments’ to repay the loan, making the money appear as legitimate export revenue despite no real underlying commercial activity.

• 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.

• Fraudulent or altered trading paperwork (e.g., purchase orders, pro forma invoices, shipping documents) is created to secure unwarranted pre-shipment loans.
• These documents overstate merchandise quantities or contract values, deceiving lenders about the viability of the export transaction.
• By masking minimal or nonexistent shipments behind seemingly valid documentation, criminals embed illicit proceeds into the trade cycle under the pretense of genuine export revenues.

Criminals use or control an import-export company to:

• Present falsified or inflated export orders, pro forma invoices, and shipping documents when applying for pre-shipment finance.
• Overstate or fabricate the volume and value of goods, concealing the absence or minimal nature of actual shipments.
• Channel illicit funds back as purported export proceeds to repay the financing, embedding criminal cash into legitimate trade flows.

Financial institutions are exploited as unwitting lenders by:

• Accepting inflated or fictitious export orders and associated documents at face value.
• Providing short-term pre-shipment financing (e.g., packing credits, working capital loans) without rigorous verification of shipping or buyer details.
• Receiving repayment from illicit funds disguised as legitimate export proceeds, effectively laundering criminal funds under the guise of normal trade transactions.