Trade based money laundering:
towards a working denition for
the banking sector
Mohammed Ahmad Naheem
Seven Foundation, Zurich, Switzerland
Purpose – This paper aims to explore in depth some of the main criminal elements involved in
trade-based money laundering (TBML) and outlines the gaps in banking risk assessment as a result of
this. The focus is on new and emerging risks due to criminal manipulation of the anti-money laundering
(AML) risk assessment processes.
Design/methodology/approach – The paper uses secondary data to provide the current context in
which TBML risk assessment is being carried out and how criminals have responded to this; it
concludes the empirical section by surmising the emerging risks that AML risk assessment need to
consider. The paper then introduces the basic components that future theoretical frameworks looking at
banking AML risk assessment would need to consider. This includes a more in-depth understanding of
how criminals are bypassing AML risk assessment so that countermeasures can be put in place and
AML frameworks strengthened and updated.
Findings – The main ndings are that sophisticated criminal processes exist that can be used to
bypass and divert current banking risk assessment techniques. An overdependence on traditional
customer due diligence and transaction monitoring can easily be thwarted, and banks need to develop
a stronger AML assessment framework.
Research limitations/implications – The research focused primarily on client documentation;
however, another area of research would be needed to cover criminal manipulation of trade documents
and other components of TBML transactions.
Practical implications – The implications from the research affect any nancial organization
undertaking AML risk analysis or compliance. It applies to the banking, insurance and auditing
professions, as well as is of interest to academics working on TBML projects.
Social implications – The social implications are that non-criminal clients within banks could be
faced with tougher requirements for documentation and ID proof, which could reduce efciency and, if
not handled properly, even alienate further some sectors of society who are already struggling to access
the main banking and nancial services sectors.
Originality/value – The originality of this paper is the inclusion of criminal responses to TBML risk
assessment and a review of aws and gaps in AML risk assessment procedures. Dynamic risk
assessment needs to be continuously updated and new emerging market risks appropriately addressed.
The author thanks Professor Muhammad Jum‘ah (a leading economist of this era based in
Damascus), who has continued to provide valuable input both through his teaching of the science
of economics and for his continued guidance.
The author acknowledges being the recipient of a research grant awarded by Princess
part of Seven Foundation’s “2020 Banking Vision – Building Banks of the Future”, and thanks her
for the continued support and motivation both to himself and other students who benet through
her generosity (www.sevenfoundation.ch).
The current issue and full text archive of this journal is available on Emerald Insight at:
Journalof Money Laundering
Vol.18 No. 4, 2015
©Emerald Group Publishing Limited