Commodity-based Trade Transactions

By systematically falsifying or manipulating commodity invoices and routing shipments through multiple jurisdictions, criminals create complex transaction trails designed to obscure and distance illicit proceeds from their criminal origins.

Through the use of layered shell or front companies and concealed beneficial owners, individuals behind these commodity trades remain hidden. This technique relies on complex ownership structures that obscure the true controllers and facilitate under- or over-pricing. By distancing the real beneficiaries from the commodities and the financial transactions, adversaries make it harder for institutions to link suspicious flows to their actual source.

This technique primarily exploits the vulnerabilities inherent in trade finance and commodity-based transactions. Criminals falsify or manipulate invoices, shipping documents, and letters of credit tied to high-value or high-volume commodities, making it difficult for financial institutions to detect suspicious pricing or verify the authenticity of trades. By repeatedly under- or over-invoicing and routing goods through complex trade finance products, illicit proceeds are layered and obscured under the guise of legitimate commodity transactions.

Multiple free trade zones and jurisdictions with weaker AML scrutiny are deliberately chosen to route commodities, creating regulatory blind spots. By exploiting differing enforcement standards and inconsistent cross-border oversight, criminals mitigate the likelihood of detection. They strategically select jurisdictions where trade documentation requirements are lax or oversight is limited, further complicating efforts to identify the true origin or destination of illicit funds.

Documents declared shipping routes, destinations, and actual goods movement.

• Permits verification of declared commodity routes and transit points.
• Helps detect suspicious free trade zone usage, last-minute rerouting, or unexplained detours commonly exploited in commodity-based laundering.

Consolidated information on countries and jurisdictions, including AML/CFT regulations, levels of enforcement, and risk indicators.

• Identifies free trade zones and high-risk regions frequently exploited for trade-based money laundering.
• Supports risk-based screening of shipments routed through less regulated jurisdictions.

Provides real-time and historical commodity price information and market trends.

• Enables direct comparison of invoiced commodity prices against prevailing market rates to detect over- or under-invoicing.
• Supports investigations by revealing unsubstantiated price discrepancies indicative of trade-based money laundering.

Comprehensive records of financial transactions detail senders, recipients, amounts, and timestamps.

• Enable detection of third-party payments not listed on official trade documentation.
• Assist in identifying unusual funding patterns that suggest trade-based money laundering.

Official records required for international trade include shipping logs, bills of lading, customs declarations, and invoices.

• These records allow for the verification of declared commodities, routes, and transaction details.
• They facilitate the detection of discrepancies such as over/under-invoicing, unexplained changes to shipping routes, or amendments to letters of credit.

Provides detailed records of commodity transactions, including:

• Commodity type, quantity, dates, and involved parties.
• Cross-checks against invoice details to identify over/under-invoicing.
• Facilitates comparison between declared shipping/route details and actual commodity movements.
• Enables detection of last-minute changes to commodity specifications in letters of credit or other trade finance instruments.

By correlating these records with official trade documentation, market pricing data, and transaction logs, investigators can spot discrepancies in pricing, quantities, or routes that commonly indicate trade-based money laundering.

Consolidated records of corporate registration, shareholder structures, and beneficial owners:

• Reveals overlapping ownership or hidden ties across multiple entities involved in a single commodity transaction.
• Supports detection of shell companies and multi-layered intermediaries used to conceal ultimate beneficiaries.

Categorize jurisdictions and free trade zones based on their enforcement levels and corruption risks. Apply enhanced checks, such as additional document requests and tighter transaction thresholds, to commodity trades involving higher-risk routes. Ensure that suspicious routings or repeated free trade zone usage undergo deeper scrutiny.

Perform thorough verification of all parties involved in commodity deals, including beneficial owners and any third-party payers. Scrutinize documentation (e.g., bills of lading, letters of credit) to confirm the economic rationale behind complex or multi-layered trade structures. Apply heightened checks on free trade zones and high-risk jurisdictions known for loosening oversight of commodity shipments.

Automatically flag payments made to or from third parties not listed on official shipping documents. Correlate partial or split payments with the stated commodity prices, and investigate repeated transactional changes that do not align with standard commodity trade practices. Incorporate analytics to compare payment flows with documented transport and invoice data.

Conduct due diligence and continuous oversight of external logistical partners, trade brokers, and other third parties involved in commodity transactions. Assess their AML controls, require compliance certifications, and maintain the right to terminate arrangements with any partner unable or unwilling to meet transparency standards.

Utilize escrow accounts for high-value or high-risk commodity transactions, releasing funds only after verifying the authenticity of shipping documents and beneficiaries. This provides a checkpoint when last-minute changes in commodity values, shipping routes, or quantities could otherwise be used to launder funds.

Leverage external data (e.g., port authority records, customs data, shipping databases, market indexes) to validate declared shipping paths, commodity volumes, and transaction counterparties. Identify discrepancies or unusual patterns, such as unexplained route detours or conflicting vessel data, to uncover hidden ownership or fabricated documentation within commodity trades.

Implement specialized trade oversight by cross-checking commodity shipments, invoice details, and shipping routes against credible market indices and official shipping data. Investigate inconsistencies in pricing, repeated amendments to letters of credit, or abrupt route changes that may signal misinvoicing or other manipulations used to launder funds through commodity-based transactions.

• Illicit actors frequently amend letters of credit to conceal sudden changes in shipping routes, commodity volume, or type, without a justifiable commercial reason.
• These alterations hinder banks' ability to confirm legitimate trade flows, enabling criminals to layer illicit proceeds under the guise of routine international transactions.

• Criminals exploit physical goods or raw materials (e.g., metals, agricultural products, machinery) by over- or under-invoicing and falsifying shipping details to launder illicit proceeds.
• These manipulations obscure the true value of shipments and hide beneficial ownership, especially when rerouted through free trade zones or complex multi-party structures, thwarting straightforward trade oversight.

• Criminals misuse trade finance documents (e.g., bills of lading, packing lists) to misrepresent commodity values, routes, or ownership.
• By layering multiple shell companies or altering paperwork, they embed illicit funds into legitimate trade flows and complicate financial institutions' efforts to detect suspicious discrepancies.

• Fraudulent or inflated invoices represent fictitious commodities or misstated quantities, enabling criminals to transfer illicit proceeds under purported trade deals.
• Altering invoice details prevents banks and authorities from easily matching payments to real shipments, obscuring both the source and destination of funds.

• Criminals provide doctored documents to banks, concealing the true value or origin of shipments.
• Discrepancies in shipping or trade documents across multiple collections hinder detection of suspicious patterns.

• Criminals move illicit value into precious metals under misrepresented purity or quantity.
• Reselling metals through different jurisdictions or intermediaries obscures the transaction trail and true source of funds.

• Repeated amendments to letters of credit mask last-minute changes in commodity type or quantity without valid commercial reasons.
• Multiple letters of credit for the same shipment create confusion and reduce effective due diligence.

• Criminals can alter shipping routes or manifests mid-journey, disguising the actual nature and value of goods.
• Layered shipping arrangements and free trade zones obscure beneficial ownership and hamper investigations.

• Traders deliberately over- or under-value trades in raw materials to create illicit gains or losses on paper.
• Layering occurs through complex trading strategies and multiple accounts, hindering detection of beneficial owners.

• Payments are made or received by unrelated third parties, distancing illicit proceeds from their true origin.
• Layering of funds through multiple payers or payees creates complex transaction chains that challenge AML controls.

• Falsified or amended shipping and commercial invoices conceal real transaction values or commodity details.
• Missing or inconsistent information across multi-party deals masks illicit financial flows within legitimate trade.

• Criminals exploit trade finance instruments to over- or under-invoice commodities, obscuring the true value of goods.
• They use free trade zones and complex routing to complicate audits, hiding the origin and ownership of illicit funds.

• Coordination of customs, logistics, and regulatory filings can be used to hide beneficial owners or alter shipping details.
• Utilizing free trade zones or multi-jurisdiction routes exploits gaps in oversight for illicit fund movement.

• Rapid, high-volume trades on commodities (e.g., metals, agricultural products) mask true ownership and distort pricing.
• Fabricated shipping documents and false warehouse receipts can be linked with platform trades to legitimize illicit flows.

• Fictitious or inflated commodity invoices are financed, enabling criminals to quickly convert illicit proceeds into seemingly legitimate funds.
• Over-invoicing commodities repeatedly generates artificial revenue streams that mask actual trade values.

Such firms—real or fabricated—manage cross-border commodity trades where prices and shipping details are manipulated. They obscure the origin and value of goods, complicating financial institutions' efforts to identify suspicious transactions in trade finance.

Criminals orchestrate these transactions by manipulating invoices, undervaluing or overvaluing shipments, and rerouting deliveries across multiple jurisdictions. They exploit free trade zones and unrelated third-party payments to obscure illicit funds, undermining financial institutions' trade finance checks.

They produce or alter bills of lading, invoices, letters of credit, or related shipping files. By falsifying commodity descriptions and values, they obstruct financial institutions' ability to verify authentic trade documentation.

These entities act as nominal importers or exporters, layering ownership to conceal the true beneficiaries. They facilitate under- or over-invoicing and fictitious shipments, complicating the ability of financial institutions to detect the actual flow of funds and goods.

These companies, whether complicit or unwitting, transport goods across multiple jurisdictions. Criminals exploit mid-route changes, false cargo declarations, and inconsistent paperwork, complicating financial institutions' trade oversight.