Transportation & Trade-Based Money Laundering Indicators

Co-mingling in supply chains: Criminals may look to “clean” illicitly sourced commodities or products by co-mingling or smuggling them with legally sourced commodities or products of the same type, thus making it harder to identify those that were illicitly sourced. Refineries, mills, factories, or other physical points in the supply chain where the source can be obscured. The co-mingling of illegally produced or stolen timber into legitimate sawmills is one of the most common ways for illicit timber to be moved, for example.

‍Ghost ships: Criminals may use so-called ghost ships or shadow fleets, which are vessels that disguise their movements to facilitate trade-based crimes, such as sanctions evasion, embargo circumvention, or money laundering. These ships turn off their automatic Identification systems (AIS) to conceal their locations and conduct illegal activities without detection. These create opaque parallel trade patterns that allow for illegal products of land conversion (like illicit timber and minerals) to be smuggled through the international shipping industry.

‍Phantom ships: Similar to ghost shipment fraud, criminals may falsify documentation to move funds in the guise of trade, without physically shipping any goods.

‍Trade diversion and transshipment: Criminals may look to re-route illicitly sourced commodities or restricted goods through intermediate countries to disguise their true origin or destination. This can help make illicit commodities appear legitimate or evade sanctions or trade restrictions. Timber, for example, may be illegally logged in a country with weak enforcement or forestry laws and then exported through an intermediary country to a final destination. This process often involves the altering of documentation to make it appear as though the timber originates in the intermediary country.

‍False invoicing and documentation: False invoicing involves either invoicing for a fake product, or over- or under-declaring the quantity or value of goods being shipped; this practice is used to move illicit commodities or proceeds across borders. False documentation could include forged letters of credit or customs and shipping documents. FIs should also be wary of relying on paper documentation, such as bills of lading: legal documents issued by carriers to shippers detailing the quantity, type, and destination of the goods in transit. These are sometimes hand-written and therefore susceptible to fraudulent alteration which may serve to obscure goods’ true provenance, thereby concealing illicit activity.

‍Bribery and corruption: Criminals may bribe customs officials to overlook discrepancies or false documentation to allow illicitly sourced or prohibited goods to pass through borders. Bribes may be paid through cash or transferred to bank accounts owned by a customs official, which are often disguised as legitimate transactions to avoid detection. Payment may also be paid in the form of luxury goods or other gifts such as travel or entertainment. There is also a risk of smaller, one-time bribes serving as a gateway to larger bribery and corruption schemes. Criminal groups engaging in wide-scale environmental crimes such as timber trafficking often have established networks and significant resources to bribe and corrupt officials at multiple levels - including offering a share of profits - or may turn to intimidation or coercion to force officials into compliance.