Key Takeaways:
- Trade-Based Money Laundering (TBML) accounts for USD 1.6 trillion in illicit flow globally, and experts believe the true figure is likely higher.
- Geopolitical drivers like the Ukraine war and tariff hikes have fueled TBML practices to evade sanctions and avoid tariffs.
- While traditional tactics like invoice misrepresentation constitute 60% of TBML, new typologies such as shadow fleets and AIS (Automatic Identification System) spoofing are on the rise.
- Hard to detect: TBML exploits multi-layered trade, cross-border flows, fragmented datasets — blind spots that traditional AML monitoring cannot uncover.
- Technology gaps: Instant payments and high trade volumes overwhelm legacy systems, making manual or rule-based detection ineffective.
- An holistic approach to TBML, advanced AI, anomaly detection, vessel/AIS tracking, and integrated KYC/AML/sanctions screening give institutions a competitive edge by reducing false positives, enabling continuous monitoring, and ensuring future-proof compliance.
Trade-based money laundering (TBML) is one of the most complex forms of financial crime, often concealed through the manipulation of invoices, shipping documents, or customs records. Unlike other laundering methods, TBML is deeply embedded within legitimate trade flows, making it notoriously difficult to detect. It is now the fastest-growing channels for laundering illicit funds.1 The combination of volume, complexity, and legitimacy makes it an ideal cover for financial crime.
The Russia–Ukraine war, constant supply chain disruptions, soaring trade volumes, and the rise of instant payments all create fertile ground for TBML schemes. These factors not only enable sanctions evasion and criminal financing but also erode trust in global trade and destabilize economies.
Given the scale of the risks involved, where a single wrong document or inaccurate price can camouflage millions, robust anti-TBML measures are now a crucial part of any comprehensive AML program.
Why TBML Requires Urgent Action
Three converging forces make TBML a more pressing threat than ever: its staggering scale, its role in sanctions evasion, and intensifying regulatory pressure.
- Scale and Incentives
According to FATF, trade-based money laundering accounts for roughly USD 1.6 trillion annually and up to 80% of illicit flows in developing countries.2 The scale is amplified by growing incentives: between 2020 and 2024, Chinese networks and Mexican cartels laundered more than USD 312 billion3 through TBML schemes, as highlighted in FinCEN’s August 2025 advisory.
Rising tariffs4 — in some cases up to 50% — further fuel manipulations of invoices and transshipment routes, giving criminals even greater motivation to exploit trade channels.
The sheer size of these flows makes TBML a systemic risk, and when combined with geopolitical pressures, the incentives to exploit it multiply.
- Geopolitics & Sanctions Evasions
The Russia–Ukraine war has pushed TBML to the center of global sanctions evasion. From shadow fleets to rerouted shipments, illicit trade has become a lifeline for sanctioned entities. To counter this, the EU released an updated dual-use goods list in 20245, tightening controls on technology products with potential military applications, while Switzerland introduced its own revised export controls in April 2025.6
- Regulatory Pressure
The geopolitical dynamics have, in turn, triggered stronger and more coordinated regulatory measures worldwide:
– FinCEN’s 2025 advisory requires financial institutions to adopt risk-based approaches to monitor all trade counterparties and transaction patterns3
– OFAC Requires screening both SDN and non-SDN Lists: Institutions need to screen all trade counterparties against Specially Designated Nationals list (SDN) and non-SDN lists, even for complex supply chains as a part of anti-TBML efforts. OFAC has also warned that secondary sanctions may apply to non-US entities that facilitate evasion.7
Together, these measures reflect a coordinated push by regulators worldwide to close TBML loopholes.
Evolution of TBML Techniques and Red Flags
Age-old TBML techniques, such as manipulation of invoices, bills of lading, or customs paperwork, over, under, or multi-invoicing, phantom shipments, and misrepresentations of goods are still common practices. However, there are also a number of new money laundering methods in the field of international trade finance.
- Traditional TBML Typologies
Traditional techniques still remain dominant. According to Global Financial Integrity, mis-invoicing still accounts for around 63% of all TBML cases globally.8 Quantity misrepresentations, false descriptions, and phantom shipments are also popular.9 Lastly, the US Narcotic and Law Enforcement Bureau points to parallel cash conversion schemes such as the Black Market Peso Exchange10, where criminal proceeds are converted into foreign currencies through informal trade channels, bypassing the formal financial system.
- Evolving Techniques & Current Red Flags
In parallel, TBML has rapidly adapted to geopolitical pressures and new technologies.
– Maritime Fraud: The International Maritime Organization (IMO) warns against maritime fraud techniques such as vessel identity laundering, flag hopping, shadow fleet, and AIS spoofing, all on the rise due to sanctions.11
– Multi-Layered Cross-Border Shipment: FATF’s June 2025 report “Complex Proliferation Financing and Sanctions Evasion Schemes” further highlights rerouting, ship-to-ship transfers, and opaque beneficial ownership structures as growing evasion tactics.12
– Technology & New Payment Rails: The adoption of instant payments and virtual asset service providers (VASPs) introduces additional blind spots, allowing illicit trade proceeds to move faster and with less traceability.
What Distinguishes TBML from Other Financial Crimes & Why It’s Difficult to Detect
TBML is so difficult to detect that the known USD 1.6 trillion yearly amount laundered is considered underreported. The October 2025 issue of Financier Worldwide magazine estimates that number to be close to USD 2 trillion.13
TBML defies traditional AML Monitoring and is challenging to detect amongst other because of the following points:
- Multi-Layered Trade: TBML embeds illicit funds within layers of legitimate trade activity, making it difficult to detect. Complex international supply chains with multiple parties — importers, manufacturers, intermediaries, shipping companies, harbors, and vessels — each with their own corporate structures, ownership hierarchies, and Ultimate Beneficial Owners (UBOs) present opportunities to obscure the origin and destination of illicit funds and make it very hard to detect fraudulent schemes. Hence, traditional AML monitoring systems struggle to effectively trace and detect suspicious activity across the full trade lifecycle.
- Complexity of Documentation and Data in International Trade: Key documents such as invoices, customs records, and bills of lading are often delayed or inaccessible to financial institutions, undermining timely checks. Traditional systems also struggle with the unstructured nature of these documents, and manual reviews are slow and error prone.
- Volume overload: Handling large volumes of trade-related documents, such as invoices, shipping records, and customs declarations, is already challenging. For financial institutions, the difficulty is compounded by limited access to the underlying trade data. Banks often only see the payment flows, making it hard to connect financial transactions to potential inconsistencies or red flags in the trade itself. Without integrated access to both trade and payment data, detecting TBML becomes even more difficult.
- Data Silos & Appearance of Legitimacy: TBML thrives in fragmented environments where no single institution has full visibility over trade flows. Data is scattered across banks, shippers, insurers, and customs authorities, creating gaps that criminals can exploit. Additionally, trade transactions are supported by detailed documentation (invoices, bills of lading, route maps, etc.) creating a presumption of legitimacy that’s difficult to refute. Without a unified platform to consolidate these data, institutions are left with blind spots that obscure suspicious activities.
- Legitimate Trade as a Conduit: Unlike smuggling or customs fraud, which generate illicit income, TBML focuses on moving illicit money under the cover of legitimate trade. By blending illegal funds with ordinary commercial flows, criminals create transactions that look routine on the surface but are designed to obscure the money trail. This merging of legal and illicit elements makes TBML especially difficult to distinguish and detect.
- Professional Laundering Networks: According to FATF, organized criminal groups, professional money launderers and terrorist financing networks work hand in hand for TBML, making it one of the most extensive and challenging crimes to stop.
Key Focus Areas to Combat TBML
Speaking on the aftermath of the China-Mexico cartel trade-based money laundering, FinCEN director Andrea Gacki said: “Financial institutions should be taking a holistic approach, looking at all the red flags identified in the advisory and into their compliance programs, and the error would be to look myopically and focus only on one aspect.” 14
Combatting TBML today requires focus on these key areas:
- Access to Quality Data: Robust TBML detection starts with reliable documentation. The IFC TBML Tip Sheet underscores the importance of accessing complete trade documentation, especially for open account trades, which make up a large share of global flows but are often poorly recorded.9
- AI-Powered Detection: Machine learning models can detect early signs of TBML by identifying subtle anomalies in trade flows. For example, vessel screening powered by AI can uncover AIS switch-offs, route deviations, and identity fraud. Pricing mismatches and data inconsistencies in high-volume trade documents can be flagged automatically using behavioral analytics and risk scoring.
- Holistic Approach: Connecting AML/KYC data with sanctions lists, adverse media, PEP checks, and trade documents provides a unified risk picture. This integrated view allows compliance teams to prioritize investigations more accurately and close blind spots. Collaboration between financial institutions and all trade counterparties is also essential to remove blind spots.
- Third-Party Risk Evaluation: Proper screening and due diligence for all counterparties (suppliers, distributors, insurers, vessel operators, and crew) will be indispensable as sanctioned entity could be anywhere in the supply chain.
How Siron®One Provides an End-to-End Solution to Combat TBML
Siron®One is designed to close the blind spots in trade finance by combining advanced AI, vessel intelligence, and unified compliance data into a single, end-to-end platform.
- Unified Compliance View
By integrating best-in-class compliance capabilities like KYC, AML/CFT, sanctions, adverse media, and risk profiles in one unified case management, Siron®One eliminates data silos and creates a “single source of truth.”
- Continuous Monitoring and Adaptive Risk Management
Perpetual KYC and automated enhanced due diligence are triggered when counterparty risk profiles change, helping institutions stay ahead of professional laundering networks and shifting regulatory expectations.
- Integrated Vessel Intelligence & Sanctions Screening
Siron®One combines real-time vessel tracking (including AIS switch-offs, route changes, and flag hopping) with automated screening against SDN, non-SDN, and dual-use goods lists. By linking this data with transactional, shipping, ownership, and customs information, it delivers a unified risk profile for every counterparty and transaction.
- Hybrid AI Approach
Rules detect known patterns and red flags while machine learning continuously discovers new anomalies and learns from historic alerts to prevent new TBML techniques. Together, users get the most comprehensive line of defense.
How Siron®One Provides an End-to-End Solution to Combat TBML
Siron®One gives institutions a compliance edge by detecting early signs of TBML, reducing false positives, and lowering investigation costs. Powered by AI, behavioural learning, and advanced analytics, it helps future-proof anti-TBML programs — ensuring that compliance teams can keep pace as criminals adopt new tactics or regulators introduce fresh sanctions.
Contact us to schedule a personalized demo or risk assessment and discover how Siron®One can help you detect and prevent trade-based money laundering.
Sources:
- https://www.researchgate.net/publication/393647199_Trade-Based_Money_Laundering_and_Supply_Chain_Finance_A_Policy-Oriented_Analysis_of_Threats_and_Countermeasures
- https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Trade-Based-Money-Laundering-Trends-and-Developments.pdf
- https://www.fincen.gov/news/news-releases/fincen-issues-advisory-and-financial-trend-analysis-chinese-money-laundering
- https://www.bbc.com/news/articles/cn93e12rypgo
- https://policy.trade.ec.europa.eu/news/2024-update-eu-control-list-dual-use-items-2024-10-01_en
- https://www.reuters.com/markets/europe/switzerland-expands-export-controls-dual-use-goods-2025-04-02/
- https://ofac.treasury.gov/faqs/topic/1631
- https://gfintegrity.org/report/trade-based-money-laundering-a-global-challenge/
- https://www.ifc.org/content/dam/ifc/doclink/2023/tmbl-tipsheets.pdf
- https://syntheticdrugs.unodc.org/uploads/syntheticdrugs/res/library/cybercrime_html/US_International_Narcotics_Control_Strategy_Report_Money_Laundering.pdf
- https://www.msn.com/en-gb/money/topstories/captain-of-convenience-how-one-man-left-a-global-trail-of-false-flags/ar-AA1JZhJW
- https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Complex-PF-Sanctions-Evasions-Schemes.pdf.coredownload.inline.pdf
- https://www.fticonsulting.com/insights/articles/trade-money-laundering
- https://www.gtreview.com/news/americas/us-fires-warning-over-mexican-cartels-chinese-money-laundering-networks/
- https://www.fatf-gafi.org/content/dam/fatf/documents/Handout-Trade-Based-Money-Laundering-Private-Sector.pdf
