Trade-based money laundering uses legitimate-looking commercial activity to move or disguise value. It may involve mispricing, false descriptions, multiple invoicing, phantom shipments or third-party payments. Because international trade naturally contains complex prices, routes and financing, no single anomaly proves laundering. Detection requires reconciling goods, documents, counterparties and money as one transaction.
Build the complete trade record
Collect the purchase order, contract, commercial and customs invoices, packing list, bill of lading or airway bill, insurance, inspection certificate, customs declaration, letter of credit, bank messages and payment records. Identify exporter, importer, shipper, consignee, beneficial owners, banks, brokers and final payment beneficiary.
Create a timeline from order to delivery and settlement. Our guide to tracking capital flows through special-purpose vehicles provides a method for mapping related parties and circular payments. Keep legal entities separate from brand names and confirm who actually contracted, shipped, paid and received.
Reconcile goods, price and quantity
Compare the description and tariff code across every document. Check quantity, weight, quality, origin, destination and container capacity against inspection and carrier records. Benchmark price with a transparent range that accounts for grade, delivery terms, insurance, currency, date, volume and local market conditions.
Over- or under-invoicing cannot be established from a generic internet price alone. Commodities and bespoke goods can vary legitimately. Record the comparison source, adjustments and uncertainty, and obtain an independent specialist valuation where the difference is material.
Test payment and counterparty logic
Ask why a third party paid, why instructions changed late, why funds passed through unrelated accounts or why the payment route differs from the physical shipment. Reconcile all amendments to contracts and letters of credit. Examine whether each party has staff, premises, trading history and an economic role consistent with the transaction.
The FATF-Egmont report on trade-based money-laundering risk indicators lists late payment changes, transit accounts, third-party payments, rapid movement, round amounts and circular routing among indicators. The report treats them as risk signals, not proof. Several can arise from ordinary trade finance or supply-chain disruption.
Combine customs, banking and corporate evidence
A bank may see payments but not the goods; customs may see declarations but not beneficial ownership; shipping companies may hold movement data without the financing terms. Link these datasets using transaction references, container numbers, dates, parties and accounts. Record inconsistent information and request clarification before escalating.
Our article on financial intelligence units explains why suspicious transaction reports generate protected intelligence rather than findings of guilt. FinCEN’s TBML advisory makes the same distinction: red flags in suspicious activity reports can assist law enforcement but do not establish illegal activity.
Document a reproducible conclusion
Use a transaction matrix showing each invoice, shipment, customs entry, payment, discrepancy, explanation and supporting record. Preserve alternative explanations and exculpatory documents. Where suspicion remains, follow the authorised reporting channel and avoid tipping off.
Trade-based laundering evades scrutiny when institutions examine only their fragment of the deal. A defensible investigation connects the commercial purpose, physical goods, pricing, ownership and funds flow—and states clearly which discrepancies are verified, resolved or still unexplained.