A bank provides trade financing for a company whose primary export is steel. Which action by the company indicates possible money laundering?

Question

Options

• AThe company often deals with foreign currency exchanges.
• BThe company regularly understates the value of goods exported.
• CThe company frequently sells above or below its competitors' price.
• DThe company frequently transfers funds to other bank accounts located in other jurisdictions.

• A
  9% (2)
• B
  74% (17)
• C
  13% (3)
• D
  4% (1)

Explanation

The company regularly understating the value of goods exported is an indicator of possible money laundering because it may suggest that the company is involved in trade-based money laundering (TBML), which is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins or finance their activities. One of the common TBML techniques is over-invoicing or under-invoicing, which involves manipulating the price, quantity or quality of goods or services in order to transfer value between the importer and exporter. By understating the value of goods exported, the company may be transferring funds to a foreign counterpart who is either a co-conspirator or a third-party money launderer, who will then pay the company the difference in cash or through other means. This way, the company can avoid currency reporting requirements, evade taxes, conceal the source and destination of funds, and integrate the illicit proceeds into the formal economy.

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