The Southern California Chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS) recently released a report which details how China engages in trade-based money laundering (TBML) to legitimize the profits of criminal activities by utilizing intermediaries in the U.S. and Mexico. Experts estimate that between $294 billion and $736 billion is laundered through the Chinese economy each year.
Money laundering through trade-based methods is becoming increasingly common for criminal organizations. Chinese money brokers have been found to use burner phones and Chinese banking apps to facilitate the process. This enables them to make large transactions without raising suspicion by introducing high volumes of cash into the system. These brokers accept drug cartel money and use it to conduct business in areas like jewelry, liquor stores and dentist offices. Then they transfer an equivalent amount of money back to the drug dealers through a secure app. The issue of TBML has been a major concern for authorities in recent years and has become an essential subject of discussion during ACAMS' annual report.
A recent report said, "Most contact with the banking system happens in China, who is uncooperative with sharing any information with U.S. authorities."
The report emphasized a number of warning signs that officials can be on the lookout for to identify businesses that may be participating in trade-based money laundering schemes. These red flags include inconsistencies between invoices and accompanying documentation, resorting to third parties for settling invoice payments, cash or wire transfer payments to vendors from unrelated parties, atypical shipping routes and packaging that does not seem to align with the contents being transported. Furthermore, the report brought attention to "carousel transactions," a practice involving the continuous import and export of the same high-value products, as another potential warning sign.
Lakshmi Kumar, policy director at Global Financial Integrity (GFI), revealed a startling estimation that the Chinese economy is used to launder a massive sum annually. GFI pointed out that China's ambitious global infrastructure project, the Belt and Road Initiative, was not formulated with crime prevention in mind, thereby offering a gateway for illicit activities to thrive. Consequently, this has led to an increase in opportunities for nefarious actors who exploit new and modernized trade routes to transport their unlawful goods and profits with ease.
