PASSAGE OF FREE TRADE AGREEMENTS WITH SOUTH KOREA, COLOMBIA AND PANAMA COULD RAISE RISK OF TRADE-BASED MONEY LAUNDERING

The United States Congress has passed the pending Free Trade Agreements with the Republic of Korea, Republic of Colombia and Republic of Panama. These agreements minimise, and in some instances, abolish, import duties and tariffs on goods coming from these nations. Whilst this event is believed to result in the creation of additional jobs in the US, there is a concern that compliance officers should be aware of.

These free trade agreements could increase the chances that money launderers working these countries may resort to the increased use of Trade-Based Money Laundering, both to repatriate drug profits earned in North America, and to facilitate the investment of cleaned criminal proceeds in the US.

If you are not familiar with the methods and tactics of Trade-Based Money Laundering, it is humbly suggested that you access the excellent material on the subject in the International Trade Alert* webpage, or review one or more of the many articles on the subject by Professor John Zdanowicz, and also a number by yours truly.

Basically, by increasing or decreasing the sales price per item, money launderers are able to move millions of dollars per month, in or out of the United States, right under the noses of bank compliance officers, who are generally unable to ascertain whether pricing is at the global market rate, especially when we are dealing with high-tech products. Exports actually occur, but the items shipped are vastly over- or under-priced, resulting in an uninterrupted flow of criminal proceeds, hidden within the huge amount of international trade transactions.

I am particularly concerned with Panama as a target for increased use of this method of repatriating drug profits for Colombian or Mexican cartels. Should you see new international trade payments, where none existed before for specific clients, please enquire to the extent necessary to rule out Trade-Based Money Laundering.

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*http://www.internationaltradealert.com/