Britain risks exposing itself to more trade-based money laundering (TBML), as it seeks to enter into new trading relationships with other countries in the unfolding post-Brexit landscape.
That’s according to research published in the latest Journal of Money Laundering Control by Mariola Marzouk, a doctorate student at the University of Portsmouth and an anti-financial crime technology consultant.
According to Global Trade Review, Marzouk’s analysis follows a national risk assessment on money laundering published by the UK government in 2020, in which it concluded there was a higher risk of money laundering now than in its previous 2017 analysis.
Marzouk also writes that the enforcement bodies responsible for investigating and prosecuting trade-based financial crime are not properly prepared for the additional cases that a more globally oriented UK could lead to.
Added to this, Marzouk said it was challenging for authorities to monitor small and medium companies trading with Asia, Latin America and Sub-Saharan Africa – regions “known for large illicit outflows”.
Amongst the observations published, Marzouk found the biggest risks came from open account trade.
Using this payment method, trading parties have to divulge very little information about themselves before agreeing to a trade transaction.
This inhibits the role banks can play in monitoring the legality of the transaction.
The Joint Money Laundering Intelligence Taskforce (JMLIT) - where banks and investigators share information about large and complex money laundering schemes – was highlighted in the research as only being successful in a very small number of cases.
Marzouk argues the UK must now consider the creation of a transaction monitoring utility, where banks pool information to detect illicit activity that would not be visible by individual institutions.
Earlier this month, the UK government announced that it was pressing ahead with introducing lower tariffs for developing countries to encourage greater trade with emerging global markets.
The UK has looked at how countries such as Canada, the US and Japan, as well as the EU, handle trade with poorer nations, to produce its own scheme.
A consultation for the scheme – which is believed to include more than 70 countries – is due to end this September.
Countries will qualify for reduced duties they are within the United Nations’ Least Developed Country framework or the World Bank’s measure of low-income and lower-middle-income countries.