Trade-based Transaction Manipulation

Through over- or under-invoicing, multiple re-invoicing, and phantom shipping, criminals execute numerous complex trade transactions specifically to obscure the true source of illicit funds. This reflects the core layering objective of distancing proceeds from their criminal origins.

Criminals misrepresent or forge documentation related to trade finance products (e.g., letters of credit, documentary collections, invoice financing) to legitimize inflated, understated, or even fictitious trade transactions. These inherent vulnerabilities in trade finance instruments—particularly the heavy reliance on documentary evidence—are exploited to embed illicit funds within nominally valid commercial frameworks.

Through the international trade channel—specifically the routing of goods, shipping documents, and customs processes—criminals capitalize on limited transparency and oversight. They generate false shipping manifests, over- or under-invoice goods, or mix legitimate cargo with illicit items, exploiting weaknesses in cross-border documentation channels.

Criminals exploit multiple jurisdictions with inconsistent AML enforcement and regulatory gaps, layering misrepresented trade transactions across different countries to evade detection. This core vulnerability is central to the technique, as the varied oversight frameworks make it far more difficult for authorities to trace illicit capital flows, thus facilitating regulatory arbitrage and complicating any single jurisdiction’s investigation.

Contains official records of cross-border shipments, including declared goods, shipping routes, volumes, and tariffs. Investigators can cross-check these data points to detect inconsistencies or non-existent cargo (phantom shipments), identify potential over- or under-invoicing based on declared versus actual imports, and confirm or refute suspicious last-minute route changes indicative of illicit trade-based manipulation.

Consolidates information on AML/CFT regulations, enforcement, and risk levels across different jurisdictions. Investigators can pinpoint high-risk routes and identify suspicious multi-jurisdictional structuring or exploitation of weaker regulatory environments, which are prevalent in trade-based laundering.

Contains real-time and historical market values for various commodities. By comparing declared invoice prices to current market benchmarks, investigators can detect over- or under-invoicing practices, which are common indicators of illicit value transfer within trade-based money laundering.

Provides detailed information on trade finance instruments such as letters of credit and bills of exchange, including payment terms, collateral details, and parties involved. This data source is pivotal for identifying unusual amendments, inflated administrative costs, and repetitive re-invoicing structures that obscure the true value or legitimacy of shipped goods in trade-based schemes.

Includes critical trade documents, such as bills of lading, commercial invoices, shipping manifests, and certificates of origin, used to validate declared goods, quantities, prices, and shipping details. Financial institutions and investigators can compare these documents against other records to uncover multiple re-invoicing, phantom shipments, or inflated costs in trade-based money laundering schemes.

Detailed records of commodity purchases, sales, or exchanges cover transaction dates, parties involved, commodity types, quantities, and prices. Investigators can cross-check the existence and details of commodity trades against invoices and shipping records, identifying potential over- or under-invoicing or phantom shipments used for trade-based manipulation.

Captures location-based details of financial transactions and shipping routes, including origin, destination, timestamps, and relevant geographic metadata. This data helps identify unusual or convoluted cross-border routing, last-minute changes to shipment destinations, and inconsistencies with normal trade lanes, all of which can signal trade-based laundering.

Houses official entity information, including registration details, directors, shareholders, and ultimate beneficial owners, enabling the identification of overlapping ownership across multiple import/export businesses. This insight helps detect collusive arrangements used to layer invoices or channel funds through affiliated entities in trade-based money laundering.

Assess each country involved in cross-border shipments for corruption levels, regulatory gaps, and known TBML patterns. Assign higher risk ratings for routes passing through jurisdictions with weak AML oversight, triggering added scrutiny or requiring more detailed documentation. By aligning due diligence with country-specific exposure, this measure mitigates risks arising from inconsistent standards across multiple jurisdictions.

Apply specialized Enhanced Due Diligence (EDD) for customers engaged in cross-border trade with higher-risk jurisdictions or commodities prone to trade-based laundering. Require supporting contracts, commercial invoices, and shipping statements to validate the authenticity of goods and confirm the legitimacy of counterparties. This measure addresses the risk of layered transactions and counterfeit documentation by closely scrutinizing beneficiary ownership and trade authenticity.

Implement TBML-specific monitoring scenarios that flag repeated re-invoicing, unexplained route changes, or invoice values significantly deviating from normal commodity prices. Investigate transactions where declared shipments and payment flows appear inconsistent or involve multiple intermediary entities lacking a clear commercial rationale. By generating alerts tailored to trade anomalies, this measure uncovers suspicious layering of illicit funds through trade.

Provide dedicated training for trade finance and supporting staff to recognize TBML typologies, such as over-/under-invoicing, phantom shipments, and frequent changes to shipping documents. Emphasize real-case red flags, appropriate escalation protocols, and coordinated reviews with compliance teams. By equipping frontline personnel with domain-specific indicators, this measure ensures early detection and escalation of suspicious trade activities.

Cross-check declared shipping routes, vessel timetables, and cargo details using openly available maritime trackers, shipping databases, and port authority records. Compare these external findings with customer-supplied trade documentation to uncover potential discrepancies in shipment quantity, destination, or commodity type. This measure addresses the vulnerability of forged shipping records and non-existent cargo by verifying actual cargo movement and port stops.

Systematically review invoices, shipping documents, and customs filings against external cargo data and official records to detect misinvoicing, phantom shipping, or inconsistent commodity valuations. Confirm the authenticity of bills of lading, verify any route changes, and compare declared unit prices with recognized market benchmarks. By proactively identifying mismatches in shipping and invoice data, this measure addresses the vulnerability of concealed value transfers in trade-based transaction manipulation.

• Fraudsters present letters of credit supported by inflated or forged shipping documents, masking overvalued or nonexistent goods.
• Once the bank’s payment guarantee is triggered, criminals receive illicit proceeds disguised as standard trade settlements.
• By manipulating documentation requirements, they obscure discrepancies between actual and invoiced cargo, embedding illicit capital in legitimate commercial channels.

• Various instruments (e.g., documentary credits, bills of lading) are manipulated to misrepresent the price, quantity, or nature of goods, embedding illicit funds in nominally legitimate shipments.
• Criminals submit forged or inconsistent documents across different customs or financial checkpoints, creating confusion over the true transaction value.
• Repeated amendments or complex routing across multiple jurisdictions further complicate detection, allowing launderers to layer illicit proceeds within regular trade flows.

• Overstated bills of exchange legitimize payments that exceed the actual value of goods, enabling criminals to embed illicit funds within trade transactions.
• The gap between the billed amount and the real shipment value represents concealed illicit proceeds.
• By falsifying or omitting supporting documents, launderers obscure the true nature of shipments, complicating due diligence efforts.

• Criminals issue inflated or fictitious invoices to overstate or understate the price or quantity of goods, thereby transferring illicit value through seemingly legitimate cross-border payments.
• These invoices serve as paper justification for fund movements, appearing as normal trade proceeds while concealing the true underlying financial flow.
• By routing multiple invoices across different jurisdictions with uneven AML oversight, criminals make it harder for authorities to detect discrepancies between real and declared values.

• Manipulated bills of exchange and shipping documents misrepresent goods, enabling payment releases that do not correspond to real cargo.
• Forged or inconsistent documentation hides the legitimate value or quantity of shipments, facilitating the flow of illicit funds.

• Fraudsters inflate invoice amounts or falsify shipping details in letters of credit, allowing them to move illicit proceeds under pretense of legitimate trade.
• The bank’s payment guarantee is triggered by doctored or misleading transport documents, concealing the true nature or value of goods.

• Phantom shipping, where goods never actually move, is disguised through false cargo documents and route changes.
• Illicit items are blended with legitimate freight, or shipment details are altered, masking the nature and value of transported goods.

• 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.

• Criminals forge or alter commercial invoices, packing lists, and customs declarations, misrepresenting goods and values.
• Through repeated amendments and cross-border filings, they introduce uncertainty that masks the true source of proceeds.

• Criminals leverage trade finance instruments to justify over- or under-invoicing, artificially shifting or obscuring illicit funds.
• Misrepresented shipping documents and inflated administrative costs enable additional payments or concealment of profits under the guise of legitimate trade transactions.

• Comprehensive management of paperwork, shipping routes, and customs procedures can be manipulated to hide cargo discrepancies and rightful owners.
• By centralizing logistics and compliance under one service, criminals embed illicit proceeds within normal trade flows.

• Criminals submit fabricated purchase orders or invoices to manipulate financing amounts, moving funds without proportional movement of actual goods.
• Over- or under-invoicing within the supply chain spreads illicit proceeds across multiple transactions and jurisdictions.

• Multiple over- or under-invoiced payments flow through cross-border transfers, exploiting inconsistent AML standards among jurisdictions.
• Rapid international routing fragments transaction trails, masking the original source of illicit funds.

• Criminals repeatedly factor inflated or fictitious invoices, obscuring real goods or services behind complex repayment cycles.
• Re-invoicing manipulations enable launderers to raise funds far in excess of actual trade value, funneling illicit capital.

Trade finance providers are exploited through:

• Issuance of letters of credit, documentary collections, or other instruments supporting misrepresented goods and inflated invoices.
• Multiple amendments to shipping or financing terms that create confusion over the actual value and ownership of cargo.
• Reliance on submitted documents (e.g., bills of lading, invoices) that may be forged or inflated, triggering payouts under false pretenses.

Import-export companies are used or established (knowingly or unknowingly) to:

• Move goods across borders under misrepresented documentation, concealing or inflating cargo value.
• Justify cross-border payments tied to inconsistent invoices, complicating financial institutions’ ability to identify trade irregularities.
• Facilitate rapid shifts in shipping routes and volumes, reducing transparency and creating discrepancies between actual and declared trade activity.

These networks orchestrate complex cross-border trade manipulations by:

• Coordinating over- or under-invoicing and phantom shipments, obscuring the source or destination of funds.
• Cycling re-invoicing processes across jurisdictions, making it difficult for financial institutions to match payments to actual goods or services.
• Exploiting uneven AML enforcement in multiple countries, layering illicit proceeds within legitimate trade flows.

Document forgers support trade-based laundering by:

• Producing altered shipping documents, customs declarations, or commercial invoices that falsify the quantity or nature of goods.
• Generating supporting evidence for phantom shipments and over- or under-invoicing schemes.
• Creating inconsistencies that complicate financial institutions’ due diligence, as official-appearing papers mask the true transaction details.

Shell or front companies facilitate trade-based laundering by:

• Holding commercial bank accounts to receive or remit payments tied to over- or under-invoiced shipments.
• Obscuring beneficial owners behind corporate structures, making it harder for financial institutions to track the real parties behind transactions.
• Conducting minimal genuine commerce, yet issuing or settling invoices used to justify cross-border funds movement.

Criminals exploit legitimate shipping and logistics services by:

• Arranging phantom shipments where no goods actually move, yet documentation triggers financial settlements.
• Mixing illicit cargo with legitimate freight, hiding the true nature or value of goods.
• Introducing last-minute route changes or inconsistent shipping details, undermining financial institutions’ transaction monitoring tied to trade routes.