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Efforts to Combat Trade-Based Money Laundering Could be Better, GAO Says

Wednesday, May 13, 2020
Sandler, Travis & Rosenberg Trade Report

The U.S. should take steps to improve the effectiveness of the trade transparency units it has set up to combat trade-based money laundering, according to a new report from the Government Accountability Office.

According to the report, different types of criminal and terrorist organizations use TBML to disguise the origins of their illicit proceeds and fund their operations. TBML schemes can rely on misrepresenting the price, quantity, or type of goods in trade transactions; e.g., by under or over invoicing goods or services, issuing multiple invoices for the same goods or services, providing more or less goods or services than the declared amount, or falsely describe the types of goods or services provided. TBML schemes commonly use goods such as textiles, electronics, automobiles, and precious metals. Available evidence indicates that the amount of TBML occurring globally is likely substantial, but it is one of the most difficult forms of money laundering to detect due to the complexities of trade transactions and the sheer volume of international trade.

Given the national security threat TBML poses, the report states, it is crucial that the U.S. develop an effective response to combat it. The federal government’s key international effort to do so is the TTU program run by U.S. Immigration and Customs Enforcement. ICE set up TTUs in 17 partner countries with the goal of exchanging and analyzing trade data to identify potential cases of TBML.

The report states that while TTUs have played a role in some TBML investigations, the program has experienced challenges, including lapses in information sharing between ICE and the partner TTUs, differing priorities between ICE and partner TTUs in pursuing TBML investigations, and limitations in the data system that ICE and the TTUs use. However, ICE has not developed a strategy for the TTU program and thus lacks a guide for its efforts to maximize the effectiveness of its existing TTU partnerships and prioritize efforts to expand the program to other countries. ICE also does not have a performance monitoring framework that tracks the results of its work with partner TTUs.

The report recommends that ICE develop a strategy and a performance monitoring framework for the TTU program. ICE responded that it has a strategic plan for fiscal years 2016 through 2020 that addresses the TTU program and plans to develop a complementary document that outlines emerging threats and challenges as well as existing metrics used to track program results. However, ICE did not concur with the recommendation to develop a performance monitoring framework, stating that the TTU program already collects a number of statistics related to its program results each fiscal year. The GAO said that while ICE has identified a few indicators it uses in assessing performance, it has not established any indicators with goals that it can measure results against.

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