How to Detect and Prevent Trade-Based Money Laundering (TBML) in 2025 – A Complete Guide
Introduction
Trade-Based Money Laundering (TBML) is a global financial crime method where criminals exploit international trade transactions to move illicit funds, evade taxes, and finance illegal activities. Banks, trade finance institutions, and businesses must be vigilant to detect and prevent TBML, as it remains a major threat to global trade.
In 2025, TBML has become more sophisticated, with criminals using:
✅ Fake invoices, over-invoicing, and under-invoicing
✅ Phantom shipments with no real goods
✅ Multiple trade finance transactions to layer illicit funds
✅ Complex networks of shell companies and offshore accounts
Why TBML Matters in 2025
🔹 Global TBML losses exceed $1 trillion annually (FATF report).
🔹 Regulatory bodies are tightening Anti-Money Laundering (AML) compliance.
🔹 Banks face huge penalties for failing to detect TBML activities.
This guide covers:
✅ Common TBML techniques used by criminals
✅ How businesses and banks can detect trade-based money laundering
✅ AI, blockchain, and compliance tools to prevent TBML
✅ Best practices for AML risk management in trade finance
Let’s explore how to identify and stop trade-based money laundering! 🚀
Common Trade-Based Money Laundering (TBML) Techniques
1️⃣ Over-Invoicing & Under-Invoicing
✔ Criminals inflate or reduce invoice values to transfer money illegally.
✔ Used to move funds across borders without detection.
🔹 Example:
✅ An importer overpays an invoice to send excess funds to another country.
✅ An exporter under-reports goods’ value to evade taxes or customs duties.
🔹 How to Detect It:
✔ Compare invoice values to market prices using AI-powered risk assessment.
✔ Require third-party verification of trade transactions.
2️⃣ Phantom Shipments (No Real Goods Exchanged)
✔ Criminals create fake trade transactions where no actual goods are shipped.
✔ Used to justify large money transfers between shell companies.
🔹 Example:
✅ A company reports an export of goods that never left the port.
✅ The bank processes a trade finance transaction based on fraudulent shipping documents.
🔹 How to Detect It:
✔ Verify shipping records using blockchain-based trade finance.
✔ Require bill of lading and transport confirmations from verified providers.
3️⃣ Multiple Invoicing for the Same Trade Transaction
✔ The same trade transaction is financed multiple times by different banks.
✔ Criminals use fake invoices to receive multiple trade finance loans.
🔹 Example:
✅ A trader submits the same invoice to multiple banks, securing financing from each.
✅ The trade never happens, but criminals receive funds multiple times.
🔹 How to Detect It:
✔ Use AI-powered invoice verification tools to detect duplicate invoices.
✔ Implement blockchain trade finance to ensure transparency.
4️⃣ Misrepresentation of Goods & Trade Documents
✔ Criminals mislabel goods to disguise sanctioned items, narcotics, or weapons.
✔ Fake descriptions allow criminals to move illicit goods unnoticed.
🔹 Example:
✅ A company labels gold shipments as scrap metal to bypass trade restrictions.
✅ Illegal shipments are disguised as legitimate goods in cross-border trade.
🔹 How to Detect It:
✔ Conduct enhanced due diligence (EDD) on high-risk trade finance applications.
✔ Use AI-based transaction monitoring to flag unusual trade patterns.
How to Detect Trade-Based Money Laundering (TBML)
1️⃣ Use AI-Powered Fraud Detection & Transaction Monitoring
✔ AI analyzes trade finance transaction patterns to detect anomalies.
✔ Machine learning models identify high-risk TBML transactions.
🔹 Best AI Tools for TBML Detection:
✔ IBM Watson Trade Analytics – AI-driven fraud risk assessment.
✔ Moody’s AI Risk Engine – Monitors trade finance transactions for TBML red flags.
✔ Finverity – Uses AI to detect fake invoices and fraudulent trade patterns.
2️⃣ Implement Blockchain for Transparent Trade Finance Transactions
✔ Blockchain ensures tamper-proof verification of trade documents.
✔ Smart contracts automate trade finance approvals, preventing fraud.
🔹 Best Blockchain-Based Trade Finance Solutions:
✔ TradeIX – Uses blockchain to track trade finance transactions.
✔ Marco Polo Network – Offers real-time supply chain financing with fraud prevention.
✔ XinFin XDC Blockchain – Provides secure digital trade finance solutions.
3️⃣ Strengthen KYC & AML Compliance in Trade Finance
✔ Implement strict Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols.
✔ Verify trade finance clients through government and financial databases.
🔹 Best KYC & AML Compliance Solutions:
✔ LexisNexis Risk Solutions – Monitors international trade compliance.
✔ ComplyAdvantage – AI-powered AML risk management.
✔ Fenergo – Automates KYC verification for trade finance.
4️⃣ Conduct Regular Trade Audits & Due Diligence
✔ Review high-risk trade transactions and trade finance approvals.
✔ Perform third-party audits to verify trade finance compliance.
🔹 Best Trade Finance Auditing Tools:
✔ Dun & Bradstreet Business Verification – Checks company legitimacy in trade finance.
✔ Euler Hermes Trade Credit Insurance – Protects against fraudulent trade transactions.
✔ Atradius Trade Risk Solutions – Offers risk assessment for global trade.
Best Practices to Prevent Trade-Based Money Laundering in 2025
📌 1️⃣ Train Employees to Recognize TBML Red Flags
✔ Educate trade finance teams on common TBML fraud techniques.
✔ Establish clear reporting procedures for suspicious transactions.
📌 2️⃣ Use AI & Machine Learning for Trade Finance Risk Analysis
✔ Automate TBML detection using AI-powered transaction monitoring.
✔ Detect suspicious trade finance activity before processing approvals.
📌 3️⃣ Strengthen Regulatory Compliance & Collaboration
✔ Partner with financial regulators, banks, and trade compliance agencies.
✔ Share trade finance fraud intelligence to detect cross-border TBML networks.
📌 4️⃣ Leverage Digital Trade Finance & Blockchain Solutions
✔ Ensure tamper-proof verification of invoices, LCs, and shipping documents.
✔ Reduce TBML risks with real-time blockchain tracking.
Conclusion
In 2025, trade-based money laundering (TBML) is a major risk for banks, trade finance institutions, and global businesses. Criminals use fake invoices, over-invoicing, and phantom shipments to move illicit funds. However, AI-powered fraud detection, blockchain security, and stronger AML compliance can help detect and prevent TBML.
🚀 Want to safeguard your business against trade-based money laundering? Explore the best AI, blockchain, and compliance solutions today!
