International trade: The anti-money laundering Achilles’ heel

MONEY laundering risks in Singapore have come under intense scrutiny in recent months following the revelation of a billion-dollar money laundering scheme in Singapore. The case involving ostentatious purchases left a poor aftertaste with Singaporeans surprised at how easily billions of dollars had made their way into the country. As the country is now very much focused on tightening anti-money laundering (AML) initiatives generally, it would be an opportune time to shine some light on the insidious risks hidden in the paper documentation that underpins international trade where fraud and money laundering can flourish.

Trade fraud and trade-based money laundering

Trade fraud and trade-based money laundering often co-exist due to the same vulnerabilities in the international trade system. International trade offers a unique proposition for any fraudster – a falsified invoice or shipping document could justify unlocking millions of dollars in financing and transferring the funds across borders under the guise of legitimate trade structures. The single act of an operations staff doctoring, altering or duplicating invoices or shipping documents is all that is needed for trade fraud and trade-based money laundering to occur hidden in plain sight.

A more worrying concern for law enforcement agencies is when staggering sums of money move across a web of companies in different jurisdictions – which may be, on paper, trading counterparts but in reality are vehicles controlled by a small group of people to perpetrate the fiction of trade for the purposes of moving funds illicitly.