The US Government Accountability Office, which audits the government at the request of elected officials, reported that it had recommended that the US Department of Homeland Security increase data sharing from the country's Trade Transparency Units (TTU) and the US Department of Homeland Security.
The TTU collects financial and custom data from the US to detect suspicious trade transactions.
GAO discovered that the TTU is "...missing opportunities to better analyze and distribute information from US Customs Data which could assist enforcement and investigative agencies in identifying suspect activities."
Over- or under-invoicing is a common method of trade-based money laundering. Banks don't always have the right to access trade documents in open-account trading. This means that they are unable to keep up with all goods' true market values.
Global Financial Integrity, an American think tank, recently calculated that invoicing errors between developing nations and their trading partners amounted to US$1.6tn.
The watchdog stated that law enforcement agencies and government agencies involved with investigating and understanding trade-based money laundering will not have access to TTU data so they won't be in a position to identify emerging risks or detect illicit schemes.
GTR reached out to the Department of Homeland Security for comments. They didn't respond. GAO was informed that the Department of Homeland Security didn't accept the recommendation to not further spread TTU data. The Department of Homeland Security stated the US Immigration and Customs Enforcement were committed to using their legal authority in order to investigate and combat trade-based money laundering and smuggling within the jurisdictional reach Homeland Security investigations.
GAO thinks that the department might have misunderstood this report. GAO points out that the US government feels it has limited data sharing capabilities with international partners through information-sharing agreements.
GAO ICE reports that they are currently developing a strategy plan to guide efforts in increasing cooperation with partner countries to combat trade-based cash laundering and to identify a strategy to guide the growth of the TTU international partnership.
The US Treasury should establish an "interagency cooperation mechanism" to facilitate information sharing between government agencies and private sector companies.
GTR asked for comments from the Treasury Department. They informed the Treasury Department about the need to make more trade data available to the Department of Homeland Security in order to improve coordination among the various government branches.
Four senators, three Republicans, and one Democrat asked the GAO to review the government's coordination. They requested that the GAO review the 2018 government approach to fighting trade-based money laundering.
GAO reports from June 2020 and February 2020 revealed that these crimes are increasing the amount of money being laundered through this method. GAO reports also showed that TTU models don't work in certain countries due to a lack of funding and follow-up.
Sheldon Whitehouse was one of the senators who requested this information. He said that "kleptocrats and drug traffickers" use sophisticated trade-money laundering strategies to conceal their illicit gains. This must be stopped by all law enforcement personnel, as well as the private sector and international partners.
Marco Rubio, a senator, requested the GAO Report. He said that money laundering continues to be a lucrative business for criminal organizations. We welcome the GAO Report so that legislators can better respond to these criminal organizations.
"It is crucial that US agencies collaborate to reduce this criminal activity. My colleagues and me look forward to working together in combating trade-based money laundering.
Problem of misinvoicing: A trillion-dollar problem
Global Financial Integrity (GFI), an American think tank, published a report last week showing that criminal gains from misinvoicing global trading have surpassed US$1tn annually since 2010. When it had enough data to analyze, 2018, the highest point was reached.
This group studies and makes recommendations about policy regarding financial crime and came up with the number by adding up all the exports each country made in order to find the total receipts.
GFI stated that while there is reason to expect some discrepancy between the reported international trade data from any two countries within a given year it believes that most of these figures are indicative trade invoice activity.
The study found that China had the highest trade deficits among all 136 countries surveyed with a US$305bn value gap. Next came India, Russia, and Malaysia.
GFI estimates that misinvoicing causes some developing countries to lose significant customs revenue and taxes. GFI conducted a survey in 170 countries and found that The Gambia had a value gap of 45%. This gap was the largest among all the developing countries.
Comments