Commodity Trafficking

Commodity trafficking generates illicit proceeds through the unauthorized trade of contraband or restricted goods. The primary objective is to obtain criminal profits from these illegal sales, which serve as the foundation for subsequent money laundering activities.

Through shell and front companies, traffickers conceal the true beneficial ownership of proceeds from illicit commodity trade. Complex ownership structures and frequent changes in corporate information undermine KYC protocols, obscuring the individuals and transactions behind criminal profits.

Criminals systematically exploit cross-border trade routes and secrecy jurisdictions with lax AML controls to launder proceeds from illicit commodity sales. By using offshore bank accounts, foreign incorporation services, and varying legal standards, they obscure the origin of funds and impede effective oversight. This cross-border dimension is central to the technique, making jurisdictional vulnerabilities the primary avenue of exploitation.

• Details import and export activity, including declared goods, shipping routes, and related documentation.
• Helps confirm whether shipments align with declared commodities, identifying potential misreporting of illicit goods.
• Provides a cross-reference point to detect inconsistencies between financial transactions and physical shipments.

• Contains information on seized goods or financial assets related to customs violations or illicit trade.
• Enables financial institutions to uncover previously interdicted shipments or assets linked to suspected traffickers.
• Supports investigations by identifying repeated patterns of asset confiscations or associated parties.

• Captures all financial transactions, including amounts, timestamps, parties, and account details.
• Enables detection of smurfing or structuring patterns, common at the placement stage of illicit proceeds from commodity trafficking.
• Provides a transaction trail for tracing funds used in the purchase or sale of illicit commodities.

• Comprises shipping logs, bills of lading, customs declarations, invoices, and certificates of origin.
• Helps confirm the legitimacy and declared nature of exported or imported commodities.
• Enables cross-checking financial transactions against physical shipment data to reveal trade-based money laundering attempts.

• Tracks commodity trades, including transaction dates, parties, types of commodities, quantities, and prices.
• Allows validation of declared goods against market norms, revealing discrepancies in volume or value.
• Supports detection of abnormal trading patterns that may signify illicit commodity transfers.

• Covers international transaction details, including amounts, counterparties, currencies, and involved institutions.
• Enables pinpointing regions or corridors linked to high-risk commodity trafficking routes.
• Assists in identifying unusual cross-border flows not aligned with legitimate trade activities.

• Provides official data on registered companies, including incorporation details, shareholders, and ownership structures.
• Unmasks shell or front companies used by commodity traffickers to conceal true ownership.
• Enables investigators to trace beneficial owners, identifying hidden links to illicit trade networks.

Identify and rate jurisdictions known for prevalent illegal trade in precious metals, wildlife products, or counterfeit goods as higher risk. Allocate increased compliance scrutiny and due diligence to cross-border transactions originating from or directed to these high-risk regions to detect potential commodity trafficking inflows.

Implement deeper scrutiny for clients dealing with high-risk commodities by verifying supply chain integrity, reviewing cross-border shipping documents, and mapping out beneficial ownership structures to expose shell or front companies. Require senior management approval and continuous monitoring of these relationships to uncover red flags such as under- or overvalued invoices and frequent unexplained transfers.

Verify the authenticity of a customer’s declared commodity trading activities by reviewing beneficial ownership details, matching claimed products with relevant trade permits, and confirming logistical capacity (e.g., dedicated warehouses, staff). This ensures early detection of front companies or inexplicable import/export practices commonly associated with illicit commodity dealings.

Deploy specialized monitoring scenarios specifically tailored to commodity-related transactions. Focus on large or frequent deposits referencing commodity sales without corresponding trade documentation and abrupt spikes in cross-border flows linked to high-risk goods such as precious metals or wildlife products. By flagging patterns indicative of smurfing or structuring in the placement stage, financial institutions can promptly investigate and disrupt illicit proceeds derived from commodity trafficking.

Incorporate specialized watchlists and adverse media sources that track organizations and individuals involved in illegal commodity dealings, such as wildlife trafficking or conflict minerals. Screen onboarding customers, existing accounts, and transactions against these lists to detect and block relationships or payments tied to blacklisted traffickers, thereby curtailing illicit flows at key choke points.

Mandate the reporting of significant or frequent cash deposits connected to commodity sales, paying close attention to structuring or smurfing techniques where deposits fall just under the regulatory threshold. Creating robust reports of large or repeated deposits helps identify potentially illicit proceeds at the placement stage.

Provide targeted training on detecting illicit commodity trading, emphasizing the unique red flags such as inconsistent trade documentation, mismatched shipping volumes, or nonsensical pricing that signal illegal activities. Equip frontline staff with procedures for swiftly escalating suspicious activity involving high-risk commodities or newly formed import/export companies.

Group and classify customers who trade in high-value or restricted commodities, such as precious metals or endangered wildlife products, into elevated risk tiers. Calibrate due diligence and monitoring controls to focus enhanced scrutiny on transactions in these segments, identifying suspicious spikes in volume or pricing anomalies indicative of illicit commodity trafficking.

Require the placement of funds from high-risk or large-value commodity transactions into escrow until supporting documentation—including shipping records, invoicing, and certificates of origin—has been vetted. By holding these proceeds temporarily, financial institutions can prevent the immediate layering or reinvestment of illicit funds generated through the illegal trade of goods.

Conduct ongoing checks of open-source databases, government registries, and credible media outlets to validate declared commodities, shipping routes, and company ownership. By verifying real-world shipping logs and cross-referencing media reports of illicit trade, financial institutions can detect front companies or false documentation tied to commodity trafficking.

Join public-private partnerships, trade finance working groups, or interbank consortia to exchange intelligence on emerging commodity trafficking routes, dubious exporters/importers, and suspicious shipping patterns. Pooling insights on commodities prone to criminal exploitation increases detection accuracy and helps disrupt organized networks in real time.

Restrict or suspend trade-related financing or cross-border wire services for customers flagged for questionable commodity dealings until the legitimacy of their transactions is verified. By limiting access to high-risk channels, financial institutions reduce the opportunities for rapid layering or integration of illicit proceeds from contraband goods.

Scrutinize trade documentation, invoices, and shipping details for inconsistencies in declared goods, unusual or manipulated pricing, mislabeling of commodities, or transit through high-risk jurisdictions known for smuggling. By applying anomaly detection to invoice values and shipping routes, financial institutions can identify trade-based money laundering tactics commonly used in commodity trafficking.

Sever business relationships with customers who are confirmed to be repeatedly engaging in illicit commodity trade or who refuse to provide sufficient documentation explaining high-risk commodity transactions. This ensures the institution does not continue to facilitate illegal flows once evidence of wrongdoing is established.

• Cross-border bank accounts are often used to layer funds derived from commodity trafficking, distancing them from the illicit source.
• Shell or front companies open business bank accounts, masking true beneficial owners and enabling purportedly legitimate commercial transactions.
• Criminals use multiple inter-account transfers, often between high-risk or secrecy jurisdictions, scattering funds so that tracking by authorities becomes more difficult.

• Criminals shift illicit proceeds into stocks or bonds—often via shell or front companies—to give the appearance of legitimate investment activities.
• Complex ownership or nominee arrangements within securities accounts further obscure the beneficial owner, making it difficult to trace funds back to the illicit sale of restricted or contraband commodities.
• Rapid buying and selling, or layering through multiple securities accounts, complicates oversight by financial institutions.

• Illicit proceeds are disguised within import/export transactions by manipulating bills of lading, invoices, or letters of credit.
• Over-invoicing, under-invoicing, or falsified documentation mask the true value or nature of goods, allowing profits from illegal commodity trade to appear as legitimate trade proceeds.
• Financial institutions find it challenging to detect anomalies when trade finance instruments are used to layer funds, distorting the genuine movement of goods and payments.

• During layering, traffickers convert illicit funds into gold or other precious metals and gemstones, exploiting these assets' high portability and relative ease of transfer.
• Acquiring or trading precious metals in jurisdictions with weaker oversight enables criminals to integrate and move large values without attracting routine transaction scrutiny.
• Reselling or refining the metals into different forms makes the original source of funds exceptionally hard to trace.

• Traffickers smuggle physical currency obtained from illicit commodity sales across borders, bypassing formal financial channels and KYC checks.
• Once inside a jurisdiction with laxer controls, they break up (structure) deposits into smaller amounts below reporting thresholds, obscuring the overall volume of illicit proceeds.
• This direct use of banknotes frustrates audits and complicates financial tracking, especially when entering different financial institutions or jurisdictions.

• Criminals can manipulate trade documents to misrepresent the shipped goods, hiding the contraband nature.
• Payment release under documentary terms makes the funds appear connected to a legitimate commercial transaction.

• Enables direct cash deposits or withdrawals from proceeds of illegal commodity trade without transparent digital trace.
• Smaller, repeated deposits (structuring) avoid detection thresholds, concealing the total criminal earnings.

• Traffickers convert illegal proceeds into gold or other precious metals, using them as stable-value assets.
• Bulk purchases and sales in precious metals markets help integrate criminal income, blurring the origin of funds.

• Facilitate small, fragmented transfers of profited funds from illicit commodity sales, bypassing stringent AML controls of traditional banking.
• Multiple accounts or users can be utilized to distribute incoming proceeds, hindering traceability and oversight.

• Can disguise the true nature or quantity of banned or illegally sourced goods through falsified transportation documents.
• Import-export entities leverage these services to integrate contraband with legitimate cargo, complicating audits.

• Facilitate the buying and selling of high-value raw materials, providing a channel for layering illicit profits.
• Fictitious or inflated trades conceal the genuine origins and volumes of trafficked commodities.

• Permits fake or altered commercial invoices, bills of lading, and other records to mask illegal commodities and their real value.
• Over-invoicing and under-invoicing techniques facilitate layering, disguising the sources of criminal proceeds in cross-border transactions.

• Instruments like supply chain financing or factoring can be misused through falsified invoices, disguising the true origin and value of illicit goods.
• Funds are layered by cycling through multiple trade finance solutions, masking any link to unauthorized commodity transactions.

• Shell or front companies can open business accounts to deposit revenues from illicit commodity trade, appearing as normal commercial transactions.
• Large or frequent deposits and transfers blend into genuine business activity, complicating detection by financial institutions.

• Provide logistical and regulatory support that can legitimize dubious shipments if documentation is falsified.
• Complex supply chains mask the actual source and destination of illicit proceeds derived from unauthorized commodity sales.

• Criminals deposit illicit proceeds from commodity trafficking in multiple, low-value transfers, making them appear as legitimate remittances.
• Cross-border capabilities facilitate rapid movement of funds, obscuring origin by layering transfers through various jurisdictions.

• Traffickers move proceeds into foreign accounts that offer higher confidentiality.
• Jurisdictional barriers reduce transparency, prolonging layering stages and impeding investigations into illicit commodities revenue.

• Offer large-scale transactions in various commodities, blending criminal funds with legitimate market activity.
• Integrate with cross-border payments, making it difficult to track the movement of illicit proceeds arising from contraband trade.

• Proceeds from trafficking are exchanged for gold items, circumventing standard banking controls.
• Physical gold transactions can obfuscate money-trail evidence, hiding illicit gains linked to contraband commodities.

• Provide opportunities to register firms abroad, distancing the illicit proceeds from direct links to traffickers.
• Lack of registration transparency in some jurisdictions masks actual ownership, aiding in layering and obfuscation of criminal profits.

• Enable creation and maintenance of shell or front companies to hide beneficial ownership of illicit funds.
• Service providers add layers of legitimacy, making it more difficult for authorities to uncover the criminal source of revenue from commodity trafficking.

Banks host cross-border accounts and process transfers of illicit proceeds derived from commodity trafficking.

• Complex wire transfers or multiple account relationships can mask illegal origins.
• Financial institutions must reconcile transaction flows with trade documentation to identify potential red flags.

Wildlife traffickers generate illicit proceeds from the illegal sale of protected animals or wildlife products.

• Engage in covert transactions to move contraband goods and receive payments that require laundering.
• Financial institutions may observe unexplained or mismatched funding sources tied to wildlife trade activities.

Money services businesses enable the rapid movement of funds linked to illegal commodity sales.

• Multiple small transfers (structuring) may be used to bypass automated thresholds and reduce detection.
• Cash-based operations pose difficulties for financial institutions attempting to trace the source of funds.

Import-export companies facilitate the laundering of commodity trafficking proceeds by commingling illicit and legitimate trade.

• Fraudulent shipping records, inflated invoices, or misdeclared goods obscure the trail of illicit funds.
• Financial institutions find it difficult to validate trade authenticity when documentation is altered or missing.

Cash couriers physically transport currency linked to illicit commodity sales across borders.

• Avoidance of formal deposit or wire channels hinders paper trails and Know Your Customer (KYC) checks.
• Incoming funds, when later placed into financial institutions, appear disconnected from the original illicit activity.

Shell or front companies are instrumental in layering, concealing the true owners of funds obtained through commodity trafficking.

• Fictitious business transactions or out-of-range invoicing mask illicit proceeds.
• Financial institutions face challenges identifying the ultimate beneficiary behind nominal corporate structures.

Money mules conduct structured deposits or withdrawals involving proceeds from illicit commodity trade.

• Multiple participants (smurfing) deposit funds in small increments across different accounts or institutions.
• This fragmentation obscures the link to the underlying criminal source for financial institutions.

Informal value transfer networks move proceeds outside standard banking channels.

• Transactions rely on personal trust rather than formal documentation, impeding traceability.
• Funds derived from illicit commodity trade may be commingled with legitimate transfers, complicating oversight.

These dealers can be exploited when illicit proceeds are converted into or disguised as high-value commodities.

• Transactions may involve false invoicing or manipulated pricing to obscure actual payment flows.
• Financial institutions risk overlooking disguised proceeds if valuations and documentation are not scrutinized.

Counterfeit drug manufacturers derive illegal income from producing and distributing unauthorized pharmaceuticals.

• Funnel proceeds through various channels, including bank and non-bank accounts, to obscure their origin.
• May use shell or front companies to legitimize profits from the sale of fake medications.