Money does not always move as money. One of the largest and least understood laundering methods hides illicit value inside the ordinary flow of international trade — by lying about the price, quantity or quality of goods. Trade-based money laundering (TBML) is hard to detect precisely because it rides on legitimate-looking commerce: real invoices, real shipping documents, real companies. FATF considers it one of the main channels for moving criminal value across borders.
The core idea
To move value from A to B illicitly, you misrepresent a trade between them. If a seller invoices £1m of goods that are really worth £200k, the buyer has just transferred £800k of value disguised as payment for goods. The shipment, the invoice and the companies can all be real — only the price is a lie.
| Technique | How it moves value |
|---|---|
| Over-invoicing | Seller bills MORE than goods are worth — buyer transfers excess value to seller |
| Under-invoicing | Seller bills LESS than goods are worth — value moves to the buyer |
| Multiple invoicing | The same goods are invoiced several times to justify multiple payments |
| Phantom shipping | Payment is made for goods that are never actually shipped |
| Quality/quantity mis-statement | Misdescribing what (or how much) is shipped to mask value transfer |
Spot the TBML red flags
Tap the features of this trade finance file that should raise a TBML concern, then reveal the flags.
Why it matters and who is exposed
TBML touches banks offering trade finance, but also exporters, importers, freight and logistics firms, and high-value-goods dealers. The FATF studies on TBML show it is used to launder the proceeds of drugs, corruption and fraud, and to evade sanctions. The Wolfsberg Group trade-finance principles set expectations for managing it.
What due diligence can do
- Know your counterpartiesIdentify and screen the buyer, seller and intermediaries.
- Benchmark pricesCompare invoice values against market rates for the goods.
- Scrutinise documentsCheck consistency across invoice, bill of lading and customs paperwork.
- Sense-check the tradeDoes the quantity, routing and rationale make commercial sense?
- Watch the structureBe alert to shell companies and needless complexity.
- Escalate and reportTreat unresolved concerns as suspicion to report.
Where Probitas fits
TBML detection needs trade and document expertise — but it also rests on knowing who the counterparties really are. A Probitas check screens the buyers, sellers and intermediaries behind a trade against sanctions, PEP and adverse media sources and surfaces ownership and shell-company signals from the public record — the counterparty layer of TBML risk. The trade-document analysis remains your own.
Trade-based
What is trade-based money laundering?
A method of laundering that disguises the movement of illicit value as legitimate international trade — typically by misrepresenting the price, quantity or quality of goods so that value moves between parties under cover of a real-looking transaction.
What are the main TBML techniques?
Over-invoicing (billing more than goods are worth), under-invoicing (billing less), multiple invoicing (billing the same goods repeatedly), phantom shipping (paying for goods never shipped), and mis-stating the quantity or quality of goods.
Why is trade-based money laundering hard to detect?
Because it hides in genuine-looking commerce — real invoices, shipping documents and companies — and any single firm usually sees only one side of the trade. Detecting it requires price benchmarking, document scrutiny and trade expertise, not just standard AML screening.
Who is exposed to TBML risk?
Banks providing trade finance, but also exporters, importers, freight and logistics firms, and dealers in high-value goods. It is a recognised channel for laundering criminal proceeds and for sanctions evasion.
What are the red flags for TBML?
Invoice prices far from market value, quantities that make no commercial sense, vague or inconsistent shipment descriptions across documents, illogical shipping routes, repeated unexplained changes to terms, and the use of shell companies or needless structural complexity.
Sources
This guide is written from primary sources. Each is linked below; claims in the text link to the specific reference they rely on.