REGULATORY INITIATIVES
Combating trade-based
money laundering through
global partnerships
H
omeland Security Investigations
(HSI), the investigative arm of U.S.
Immigration and Customs Enforcement, has been a leader in the pursuit of
trade-based money laundering investigations.
Due to its unique authority and access to
both trade and financial data, HSI is strategically positioned to combat criminal organizations exploiting vulnerabilities in the global
trade and financial systems.
What is trade-based money laundering?
Trade-Based Money Laundering (TBML) is
a type of money laundering where criminals use the international trade system to
disguise illicit proceeds by altering customs
and banking paperwork, making it appear
as legitimate. Unfortunately, vulnerabilities
in the international trade system provide
numerous opportunities for exploitation. Some criminals simply depend on
the sheer volume of international trade
to hide their crimes. Others rely upon the
complexity of foreign exchange transactions and diverse financing instruments
to conceal their fraudulent activity. Many
traditional customs fraud methods such as
false-invoicing, over-invoicing and underinvoicing commodities are often used to
move value around the world. To further
increase the value of their illicit funds,
criminals often layer various schemes.
Black Market Peso Exchange
One well-known example of TBML, used
extensively by Colombian drug cartels to
repatriate drug proceeds, is commonly
referred to as the Black Market Peso
Exchange (BMPE). BMPE operates as an
underground financial exchange system
used to evade record keeping requirements
mandated by the Bank Secrecy Act (BSA) in
the U.S., as well as to evade Colombian bank
reporting requirements, customs duties, sales
tax and income tax. The overall scheme
involves the purchase of U.S. export goods
destined for Colombia with proceeds from
the sales of illegal drugs.
The following scenario demonstrates how a
Colombian cartel could use BMPE to launder
illicit funds. A Colombian cartel sells cocaine
in the U.S. and receives illicit U.S. dollars. The
cartel then contacts a Colombian peso broker
to launder their money. The peso broker
arranges to have the illicit proceeds picked
up from the cartel and placed into U.S. financial institutions, often by structuring deposits
into various bank accounts. Next, the peso
broker finds Colombian importers who want
to import U.S. goods, and U.S. exporters who
will export goods to Colombia.
Once these relationships are established, the
peso broker uses the illicit proceeds already
embedded in the U.S. banking systems to
pay the U.S. exporters for the shipments to
Colombia. Therefore, the illicit proceeds
never leave the U.S. The peso broker then
directs the exporter to ship his goods to a
specified Colombian importer. The Colombian importer receives the goods and then
pays the Colombian peso broker in pesos for
the shipment. The peso broker then returns
the clean pesos to the