Free video course
Trade-Based Money Laundering: Basic Techniques
Learn to recognize the four core trade-based money laundering techniques that compliance professionals encounter most often, starting with the FATF definition and working through practical examples of invoice manipulation and shipment fraud.
✓ Technique definitions verified against the FATF 2006 Trade-Based Money Laundering guidance.
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What you’ll learn
- ✓ Recognize the FATF 2006 definition of trade-based money laundering and apply it to real transactions
- ✓ Identify over-invoicing and under-invoicing patterns in trade documentation and explain which party benefits in each direction
- ✓ Describe how multiple invoicing and falsely described goods obscure the money trail and how colluding parties deflect scrutiny
- ✓ Name the four basic TBML techniques and the document-based red flags associated with each
Before you start
- □ Basic understanding of import and export trade flows
- □ Familiarity with AML concepts such as placement, layering, and integration
Course curriculum
- 01 What is trade-based money laundering and how does invoice manipulation work? Understand the FATF 2006 definition of TBML and how over-invoicing and under-invoicing transfer illicit value between importers and exporters through distorted prices. TBML disguises criminal proceeds inside trade transactions. Over- and under-invoicing manipulate invoice prices so one party retains a profit that compensates for illicit value transferred from the other side. · The FATF 2006 definition frames TBML as value movement through trade, not merely cash smuggling across borders.· Under-invoicing benefits the importer, who sells goods at true market value and retains the price gap as undocumented profit.· Over-invoicing benefits the exporter, who receives payment above production cost and retains the excess after covering costs.· Tax fraud is a near-certain co-occurring crime in both invoicing variants because the mispricing affects declared revenues and costs. 5 min · checkpoint
- 02 What are multiple invoicing, over-shipments, and falsely described goods in TBML? Learn how multiple invoicing, shipment volume manipulation, and false goods descriptions are used as trade-based money laundering techniques in international commerce. Three further TBML techniques rely on document or shipment manipulation rather than price distortion alone: billing the same order multiple times to different banks, overstating or understating shipped volumes, and misrepresenting what is actually inside the cargo. · Multiple invoicing inflates total payments well above the true order value by using separate bank accounts to fragment the paper trail across institutions.· Plausible cover stories for duplicate invoices, such as amended payment terms or late fees, are prepared in advance by colluding parties.· Phantom shipments, where no goods move at all, are the logical endpoint of over- and under-shipment fraud taken to its extreme.· Falsely described goods exploit the gap between what customs documents declare and what is physically inside the shipment or service contract. 3 min · checkpoint
Frequently asked questions
Why is trade-based money laundering so hard to detect?
TBML exploits the sheer volume and complexity of global trade. Customs agencies focus on physical contraband and duty collection, and they rarely have access to comparable pricing data for every commodity. Complex supply chains and multiple intermediaries further obscure whether an invoice price reflects true market value, making any single discrepancy easy to dismiss as normal commercial variation.
What distinguishes TBML from other forms of money laundering?
TBML uses legitimate trade transactions as the vehicle. Rather than moving cash directly, criminals disguise illicit value inside commercial invoices, shipping documents, or service contracts. The laundered proceeds look like normal business income, which makes them harder to trace than cash-based methods and harder to challenge without commodity pricing data.
Does TBML require both the importer and exporter to collude?
In most TBML techniques, yes. Over-invoicing, under-invoicing, and multiple invoicing all require both parties to agree to false documentation. Without collusion on both sides of the trade, the receiving party would simply dispute an incorrect invoice rather than participate in transferring illicit funds.
What is a phantom shipment in the context of TBML?
A phantom shipment is an extreme form of over- or under-shipment fraud where no goods are physically moved at all. The trade documents are fabricated entirely. Payment flows between the parties as if a real trade occurred, but the underlying commercial transaction never took place. The entire value of the payment is the laundered amount.