PREVENTING

TRADE-BASED MONEY
LAUNDERING IN AUSTRALIA
FINANCIAL CRIME GUIDE OCTOBER 2022
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ACKNOWLEDGMENTS

This financial crime guide was developed by Fintel Alliance,

ATTRIBUTION a public-private partnership led by AUSTRAC.

Material obtained from this publication is to be attributed to: Thank you to all of our partners who contributed
AUSTRAC for the Commonwealth of Australia 2022. to this financial crime guide.
CONTENTS
How to use this financial crime guide 3
About financial crime guides 3
About Fintel Alliance 4
Importance of partnerships 4

INTRODUCTION 5

WHAT IS TRADE-BASED MONEY LAUNDERING? 7

What goods are used for trade-based money laundering? 8

THE AUSTRALIAN FOOTPRINT 9

Trade-based money laundering methodologies 10

TRADE-BASED MONEY LAUNDERING INDICATORS 12

Customer indicators 13
Financial indicators 14
Illicit cash integration 17

18

REPORT SUSPICIOUS MATTERS TO AUSTRAC 19

For more information 19
Additional resources 19

GLOSSARY 20

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HOW TO USE THIS ABOUT FINANCIAL
FINANCIAL CRIME GUIDE CRIME GUIDES
This financial crime guide has been developed to Financial crime guides provide information about
assist government agencies and financial service the financial aspects of different crime types.
providers to understand and identify trade-based They include case studies and indicators that can be
money laundering, and where appropriate, used to identify if this offending could be occurring.
report suspicious financial activity. They are developed with AUSTRAC’s Fintel Alliance
The indicators and behaviours in this financial partners, relevant government agencies, and
crime guide can be used by financial service industry partners. This guide was developed by
Fintel Alliance in partnership with the Australian
providers to review their profiling and transaction
Border Force.
monitoring programs to target, identify and stop
financial transactions associated with trade-based
money laundering.
SUSPICIOUS MATTER REPORTING
Trade-based money laundering schemes vary in
complexity and can be challenging to detect as If you identify possible indicators of
trade-based money laundering or other
they can involve multiple parties and jurisdictions
criminal activity through financial
and misrepresent the price, quantity or quality of
transactions and determine you need to
imported or exported goods.
submit an SMR, include clear behavioural
No single indicator will be a definitive way to and financial indicators in your report.
identify if a business is being used or exploited for This will help AUSTRAC and our law
trade-based money laundering activities. Financial enforcement partners to respond and
service providers should use a combination of take action.
indicators highlighted in this report and business For more information, see the various
knowledge to conduct further monitoring and available resources regarding effective
identify if there are reasonable grounds to submit suspicious matter reporting.
a suspicious matter report (SMR) to AUSTRAC.

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ABOUT IMPORTANCE OF
FINTEL ALLIANCE PARTNERSHIPS
Fintel Alliance is a public-private partnership led Public-private partnerships are globally recognised
by AUSTRAC that brings together government, law as an effective way to identify, target and disrupt
enforcement, private and academic organisations to: illicit financial transactions associated with
trade-based money laundering.
• support law enforcement investigations into
serious crime and national security matters Fintel Alliance established a working group to bring
• increase the resilience of the financial sector together experts, analysts and practitioners on the
to prevent criminal exploitation complex topic of trade-based money laundering.
Fintel Alliance partners recognise trade-based
• protect the community from criminal money laundering as a serious risk and use the
exploitation. public-private partnership to identify, target and
Fintel Alliance partners include businesses from the disrupt this offending to protect businesses, the
financial services, remittance and gaming industries community and the Australian economy.
as well as law enforcement and security agencies in
Australia and overseas.

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INTRODUCTION
Criminals are using increasingly sophisticated Trade-based money laundering is a broad activity
methods to disguise the proceeds of crime and that can overlap other criminal activities, making
integrate the resulting funds back into the financial it difficult to identify. The broadest definition of
system. Criminals engaged in trade-based money trade-based money laundering encompasses
laundering use the trade of goods and services to any criminal activities where trade is used as the
move illicit money into and out of Australia and channel of disguise or justification.
around the world.
The growth of world trade has led to an increase
International trade is an attractive avenue for in money laundering, proliferation and terrorism
the movement of the proceeds of crime and financing vulnerabilities. As controls applied to
presents different risks and vulnerabilities that are other money laundering techniques become
exploited by criminals and other complicit parties. increasingly effective, the use of trade-based
Characteristics that make trade attractive for money money laundering is expected to become more
laundering include: attractive, revealing the ability of criminal groups
• The significant volume of trade flows that to continue adapting to the changing environment
occur around the world every day. This in which they operate.
environment enables criminals to obscure
their transactions and decrease the risk of For these reasons, financial service providers
detection. must remain vigilant in their efforts to combat
trade-based money laundering. Financial service
• The complexities involved in trade finance providers, particularly those engaged in trade
products and import/export processes.
financing, should understand the associated
These complexities assist in preventing the
money laundering, proliferation and terrorism
detection of this crime type, as does the
financing risks associated with trade-based money
comingling of legitimate and illegitimate
laundering. They should also have appropriate
funds within trade activity.
risk-based systems and controls in place to respond
• Related financial transactions are commonly to criminals seeking to harm the Australian
fragmented, making it challenging for community and profit from their crimes.
reporting entities to use transaction
monitoring processes as they are unlikely to
have oversight of the whole transaction chain.
The intelligence and information shared
• The multiple supply chains, processes, by the financial services sector is critical
parties, transactions and jurisdictions in helping AUSTRAC and its government
involved in the trade process, as well as partners identify and dismantle criminal
the speed of transactions, create additional networks moving the proceeds of crime
challenges in detecting trade-based through the Australian financial system.
money laundering.

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 EXAMPLE OF A TRADE SUPPLY CHAIN
REPRESENTING KEY PARTIES AND THEIR LINKAGES

Supplier
Manufacturer

Flow of
Exporter goods

Distributor

Warehousing

Transporter

Importer

Retailer
Flow of
money Consumer

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WHAT IS TRADE-BASED MONEY
LAUNDERING?
The Financial Action Task Force (FATF) defines The source of trade-based money laundering funding
trade-based money laundering as the process of can be derived from a range of crimes, including:
disguising the proceeds of crime and moving funds
• drug trafficking
through the use of trade transactions in an attempt
to legitimise their illegal origin or finance activities. • corruption and foreign bribery
As the FATF notes, the aim of trade-based money • tax evasion and tax related fraud
laundering is not the movement of goods, but the
movement of money, which the trade transactions • illegal wildlife trafficking
facilitate. There are several trade-based money • evasion of customs and excise tax
laundering techniques used to move the proceeds
of serious crimes from one jurisdiction to another • smuggling of illicit goods and precursor
to make them appear legitimate. chemicals
• fraud and identity crime.

ILLICIT FUNDS CAN BE MOVED OUT OF AUSTRALIA BY:

Importing goods at overvalued prices Exporting goods at undervalued prices

Exporter

OR

Importer

ILLICIT FUNDS CAN MOVED IN TO AUSTRALIA BY:

Importing goods at undervalued prices Exporting the goods at overvalued prices

OR

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WHAT GOODS ARE USED
FOR TRADE-BASED MONEY
LAUNDERING?
Criminals do not favour one type of product and
will use any form of goods to facilitate trade-based
money laundering. Criminals prefer goods that
are difficult to value or fluctuate in price to reduce
the risk of having them being valued accurately.
In Australia, goods at a high risk of being used for
trade-based money laundering include recycled
textiles, sugar, cement, precious gemstones, bullion,
tobacco, liquor, scrap metals, solar panels, luxury
cars, mobile phones and meat products.

Services-based money laundering

presents additional money laundering and
terrorism financing risks. Services-based
money laundering exploits the trade of
services or other intangibles to disguise and
legitimise the movement of illicit proceeds.
Services could include software, virtual assets,
trademarks, financial, gambling, consultancy
and advisory services.
This financial crime guide does not focus on
services-based money laundering financial
indicators. For more information read the
FATF Trade-Based Money Laundering Trends
and Developments report.

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THE AUSTRALIAN FOOTPRINT
Australia has a developed economy, relative Combatting trade-based money laundering
economic wealth and a considerable reliance on requires collaboration between government, law
international trade, which provides investment, jobs enforcement and financial service providers.
and opportunities for individuals and businesses. The global nature of international supply chains
Trade benefits most Australians through access to means no single authority will see the complete
an increased range of goods at competitive prices. trade picture.
Unfortunately, international trade is recognised Trade-based money laundering is a transnational
as an attractive channel for criminal organisations threat which is not restricted by national borders.
and terrorist groups to move the proceeds of crime
across borders. Trade is targeted by transnational
serious organised crime syndicates with support
provided by either witting or unwitting professional
facilitators to enable access to international finance
and trade systems.

AUSTRALIA’S TOP 10 TWO-WAY TRADING PARTNERS

Information from the Department of Foreign

Affairs and Trade identifies that Australia’s
top ten trading partners account for 69% of
Australia’s two-way trade1.

China
Japan 26.4%
US 31%
Republic of Korea
Singapore
New Zealand
UK 9.9%
India
Malaysia 2.8% 8.6%
Thailand 2.8%
Other
3.4% 4.6%
3.4%
3.4% 3.7%
1 dfat.gov.au/sites/default/files/trade-investment-glance-2020.pdf

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TRADE-BASED MONEY
LAUNDERING METHODOLOGIES
Trade-based money laundering in Australia involves a In addition to the misrepresentation of value,
range of techniques that enable illicit funds to be moved trade-based money laundering can also involve the
from one jurisdiction to another. These techniques misrepresentation of quality, quantity, and weight.
are used to misrepresent or obfuscate the value of
goods to enable the movement of funds obtained by In Australia, trade-based money laundering can be
illicit means. Australian law prohibits dealing in the categorised into the following seven techniques:
instruments or proceeds of crime as well as customs fraud.

Exporter

 Over invoicing or under shipping

The importer transfers money to the
exporter by paying above market value Importer
for the goods.

 Under invoicing or over shipping

The exporter transfers value to the
importer by shipping goods that are
worth more than the invoiced amount.

 Multiple invoicing
The exporter issues more than one invoice
for a shipment to transfer greater value to
the exporter.

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  Falsely describing goods
The importer transfers value to the Mona Lisa
exporter by describing the goods
as being of a higher or lesser quality,
and therefore of a higher or lesser value,
than they actually are.

 Phantom or ghost shipments

No goods are physically shipped and
all documentation is falsified to enable
the full value of the phantom or ghost
shipment to be laundered.

 Carouseling and obfuscation

This involves importing and exporting
the same goods repeatedly between
the same parties using a separate set of
invoices each time. Parties may structure
transactions to avoid alerting authorities
by omitting, disguising or falsifying
information.

 Illicit cash integration

Illicit cash is used to purchase goods
that are moved from one jurisdiction
to another before being sold, with the
illicit funds available in another country.

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TRADE-BASED MONEY
LAUNDERING INDICATORS
The indicators in this guide can be used by financial
service providers to review their profiling and
transaction monitoring programs to identify, target
and disrupt financial transactions associated with
trade-based money laundering.
Each indicator in this guide should trigger enhanced
customer due diligence. Financial service providers
should use a combination of customer and financial
indicators, combined with knowledge of their
business to monitor, mitigate and manage risks
associated with any unusual activity.
Where a suspicion is formed, financial service
providers must take steps to reduce any risk and
submit an SMR to AUSTRAC.

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CUSTOMER INDICATORS

BUSINESS KNOWLEDGE, EXPERIENCE MOVEMENT OF FUNDS

AND HISTORY • Customer appears to conduct business
• Customer has limited or no import/export exclusively with a single counter party.
knowledge or history.
• Customer prefers to pay cash even if they
• Customers are suddenly involved in the qualify for open credit terms.
import/export of goods, having never been
• Customer utilises a payment method
involved in this type of activity previously,
of unnecessary risk or via a third party.
including sole proprietor entities.
• Debtors for the customer’s trade finance
• Customer is unfamiliar with the intended
are associated with the customer.
use of the product being purchased.
• Trade is undertaken between associated parties.
• There is no open source footprint of the
company or director/beneficial owner.
DOCUMENTATION AND PRIVACY
• Adverse media holdings exist on the
• Customer requests an unusual degree of
company or director/beneficial owner.
confidentiality or deviation from established
• Open sources relating to the company ‘know your customer’ processes.
indicate a different industry compared
• Customer provides evasive or incoherent
to the goods being imported/exported.
responses to enquires on why pricing
• The products requested do not fit or align with patterns, goods or jurisdictions have
the customer’s primary business activities. changed dramatically.
• Customer is a director/beneficial owner to • Customer is unable to produce appropriate
companies operating in seemingly unrelated documentation to support a requested
industries e.g. car export and grain import. transaction e.g. invoices.
• Customer operates a complex corporate • International payments involving multiple
structure, which does not make any apparent entities appear to have connected addresses,
business sense or the transaction involves contact details and/or key personnel.
the use of multiple shell companies.
• Businesses or companies are controlled
by the same group of people.

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FINANCIAL INDICATORS

OPEN ACCOUNT TRADE INDICATORS Payments and Transactions

Open account trade is when buyers and • Transactions are in round dollar amounts.
sellers agree to the terms of trade and payment • Unexplained changes in the volume and/or
timeframes. In this type of transaction the goods value of transactions.
are shipped and delivered before the payment is
due. The payment is then made within the agreed • Evidence of consistent and significant cash
timeframes between the buyer and seller. payments, including to previously unknown
third-parties.
The buyer is responsible for making the payment
and typically involves the use of financial Business
institutions to facilitate the payment process. For • Unexplained rapid growth of a newly formed
open account trade, financial institutions do not business in an existing market.
usually have visibility of documentation to provide
evidence of the underlying trade. • Transaction amounts that are inconsistent
with the scale of a business’s regular activities
and/or customer profile.

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Customer DOCUMENTED TRADE FINANCE
• Customer receives a large volume of cash INDICATORS
deposits via automatic tellers machines Documented trade finance is a service provided
(ATMs) and bank branches in a broad by financial institutions to facilitate the payment
geographical area. of goods through invoice financing and payment
• Customer appears to conduct business guarantees. These operations typically encompass
exclusively with a single counter party. ‘documentary trade’ such as letter of credit and
document collections e.g. trade finance loans,
• Customer sends or receives consecutive payable finance and receivables finance.
payments domestically or internationally
where payment reference details are the Trade financing is used to reduce domestic or
same e.g. the same invoice number. international trade risks such as foreign currency
fluctuations, creditworthiness and concerns of
Movement of funds non-payment. However, trade-based money
• Transactions involve multiple parties and laundering techniques can include falsified
the transfer of ownership or the use of documents and evidence that is supplied
intermediaries to disguise the true nature to financial institutions.
of a transaction.
Value of goods
• Transactions are made between related
• Value of goods on the invoice is inflated/
parties e.g. entities with the same directors
deflated compared to market value.
or directors who are known to each other,
such as family members. • Significant price difference for the same
or similar goods previously traded by the
• Funds are pooled in the account of a
customer with no logical explanation for
company based in Australia and then sent
the price difference.
back offshore.
• Additional charges are included on
• Funds are sent back and forth multiple times
documentation e.g. a premium handling
between the same entities e.g. the importer
service fee.
and exporter roles are reversed.
• Advance payments to sellers in high risk
• The transaction involves payment by cash,
jurisdictions used with no subsequent
wire transfer, postal money orders etc. from
shipment taking place.
a third party with no obvious connection to
the transaction.

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Falsified information Shipment
• Transport documentation cannot be verified. • Size of the shipment appears inconsistent
with the scale of the exporter/importer’s regular
• Multiple or duplicate invoices and
business activities and/or customer profile.
documents for the transportation
of the same goods. • Freight, exporter/importer or customs costs
are unusually high, with no logical explanation.
• Duplication of information across
documentation, such as importer/exporter, • There are no freight exporter/importer or
goods, vessel details, seal numbers, customs costs for purported previous trade.
container numbers or invoice numbers
• Bill of lading has the incorrect shipping
(which may be falsified).
registration details.
• Obvious alterations to documents, such as
• Packing is inconsistent with the goods
seals or stamps from other banks, letter
e.g. perishable goods not being shipped
heads and invoices that appear to have been
in refrigerated containers.
superimposed on other letters or obvious
alterations to documents. • Jurisdictions involved in the trade transaction
are deemed higher risk for money laundering
• Significant discrepancies on official
or terrorism financing activities.
documentation for the description, value,
quality or quantity of goods. Movement of funds
• Letters of credit are for a new or recently • Importer/exporter roles are reversed on
registered overseas company which is different documents.
purportedly a subsidiary of an established
parent entity; however, there are no clear • Goods are exported to countries without
links between the two. strict foreign exchange/import controls and
have known weaknesses in their anti-money
• Letters of credit are amended frequently. laundering, counter-terrorism financing and
• The shipment does not make economic sense anti-bribery and corruption frameworks.
e.g. the use of a 40-foot container to transport • A freight forwarding firm or residential address
a small amount of low-value merchandise. is listed as the product’s final destination.
• Bill of lading describes cargo in a container • Multiple lines of credit are requested where
that contains sequential numbers or does the accompanying shipping manifests
not show container numbers. appear inaccurate e.g. different ports, seals
• Inconsistent font/text used for inserted or container numbers.
details recorded on the bill of lading. • Rapid transactions sent offshore are linked
to letters of credit with a new/recently
Customer registered overseas company which appears
• Customer cannot produce appropriate to have been set up as a shell company e.g.
supporting documentation e.g. invoices, bill the offshore company has no office, website,
of lading and copies of documents presented phone number or business activity.
instead of originals to claim payment.
• The transport route is unusual or indirect,
• Customer appears to conduct business does not make geographic sense, appears
exclusively with a single counter party. to cross a sanctioned country or involves
jurisdictions for no apparent economic reason.

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ILLICIT CASH INTEGRATION
CASE STUDY:
Illicit cash integration takes advantage of trade SYDNEY-BASED MONEY
supply and demand. Through this process, the LAUNDERING SYNDICATE TARGETED
proceeds of crime are used to purchase goods An investigation targeted a Sydney-based
in one jurisdiction and are shipped for use or money laundering organisation which
consumption in another where these items may resulted in three arrests. The money
be unavailable, or in short supply. Illicit cash laundering organisation attempted to
integration enables the proceeds of crime to be launder over $100 million in cash from
moved from one jurisdiction to another through transnational serious organised crime
the trade process, with the sale of the goods in the groups out of Australia.
destination country enabling the funds to appear
to have come from a legitimate source. The funds were the proceeds from the sale
of illicit drugs in Australia. These illicit funds
Surrogate shopping or ‘daigou’ is a process that were used to purchase low value consumer
can be targeted by organised crime groups goods, such as dairy products, cosmetics
to move the proceeds of crime through trade and cleaning products, for subsequent
between different jurisdictions. The purchase of shipment and sale in another jurisdiction.
readily available goods that are in high demand in The movement of the purchased goods
the destination jurisdiction presents an opportunity enabled the proceeds of crime to transfer
for trade-based money laundering. out of Australia without creating a financial
footprint.
ILLICIT CASH INTEGRATION INDICATORS Members of the money laundering syndicate
• Domestic transfers or card purchases are to were arrested and charged with dealing in
pharmacies and luxury stores. the proceeds of crime. The offenders were
sentenced between three to seven years
• High cash activity on a customer’s account.
imprisonment for the offending.
• Layering of funds between multiple companies.
• Funds are ultimately withdrawn in cash or
sent overseas via international payments.
• An absence of legal documents showing
the nature of the commercial relationship
between coordinators and shoppers.

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PREVENTING MONEY LAUNDERING
THROUGH TRADE
AUSTRAC recognises that most trade is legitimate To address these risks, financial service
and involves the legal movement of goods within providers should identify and understand the
Australia or from one jurisdiction to another. associated money laundering and terrorism
However, financial service providers, should assess financing risks and have appropriate risk-based
and understand the risks associated with the systems and controls in place as part of their
services they offer. AML/CTF programs.

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REPORT SUSPICIOUS MATTERS
TO AUSTRAC
Observing one of these indicators may not suggest FOR MORE INFORMATION
illegal activity on its own. When you conduct further
monitoring and observe other activity that raises If you have questions about your AUSTRAC
suspicion, you should submit an SMR to AUSTRAC. compliance obligations, please email
High-quality, accurate and timely SMRs give us contact@austrac.gov.au or phone 1300 021 037.
the best chance to identify, target and disrupt The Australian Border Force operates a Border
trade-based money laundering to help protect Watch program to educate, inform and encourage
businesses and the Australian community. members of the community and industry to report
To find out more visit: austrac.gov.au/smr. suspicious border-related behaviour and activities.
You can read more about the program on the
Australian Border Force website.

WHEN TO SUBMIT AN SMR

TO AUSTRAC ADDITIONAL RESOURCES
If you see something suspicious and report
it to police, you must also report it to This financial crime guide provides insight into
AUSTRAC. trade-based money laundering offending in Australia
including indicators and case studies. For further
You must submit an SMR to AUSTRAC if information, download the following reports:
you suspect on reasonable grounds that
a customer is not who they claim to be, or
FINANCIAL ACTION TASK FORCE AND
the designated service relates to terrorism
EGMONT GROUP
financing, money laundering, an offence
against a Commonwealth, State or Territory • Trade-Based Money Laundering –
law, proceeds of crime or tax evasion. Risk Indicators
• Trade-Based Money Laundering –
Trends and Developments
• APG Typologies Report

THE WOLFSBERG GROUP

• The Wolfsberg Group, ICC and BAFT –
Trade Finance Principles

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GLOSSARY
NAME DESCRIPTION
Bill of lading A legal document issued by a carrier to a shipper detailing the type, quantity and
destination of the goods being carried. A bill of lading is a document of title to the
goods and a contract of carriage. It must accompany the shipped goods and be
signed by the carrier, shipper and receiver.
Letter of credit An instrument issued by a financial institution guaranteeing payment to the
beneficiary, on condition that all the terms and conditions of the letters of credit
have been complied with. Letters of credit are a payment method used for the sale
of goods between exporters and importers.
Daigou A business model that relies on personal shoppers in one jurisdiction purchasing
(surrogate consumer items which are unavailable, or in short supply, in another jurisdiction
shopping) and then shipping those items for consumption or use in that second jurisdiction.
Open account When buyers and sellers agree to the terms of trade and payment timeframes.
trade In this type of transaction, the goods are shipped and delivered before payment is
due. The payment is then made within the agreed timeframes between the buyer
and seller. The buyer is responsible for making the payment and typically involves the
use of financial institutions to facilitate the payment process. For open account trade,
financial institutions do not typically have visibility of documentation to provide
evidence of the underlying trade.
Proliferation Defined by the FATF as the provision of funds or financial services used for the
financing manufacture, acquisition, possession, development, export, trans-shipment, brokering,
transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and
their means of delivery and related materials.
Services-based Exploits the trade of services or other intangibles to disguise and legitimise the
money laundering movement of illicit proceeds. Services could include software, virtual assets,
trademarks, consultancy and advisory services.
Supply chain A network of entities involved in creating, manufacturing, transporting and
distributing any type of goods from a seller to a buyer/consumer. The supply chain
includes suppliers, distributors, importers, exporters, transportation providers and consumers.
Trade-based The process of disguising the proceeds of crime and moving profits through the use
money laundering of trade transactions in an attempt to legitimise their illegal origin or finance their activities2.
Documented trade A financial institution service that facilitates the payment of goods through
finance invoice financing and payment guarantees. These operations typically encompass
‘documentary trade’ such as letter of credit and document collections e.g. trade
finance loans, payable finance and receivables finance.

2 fatf-gafi.org/media/fatf/content/Trade-Based-Money-Laundering-Trends-and-Developments.pdf

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AUSTRAC.GOV.AU 1300 021 037

contact@austrac.gov.au