Rising Trade Based Money Laundering (TBML) in Ghana: Evidence of the failure of Ghanaian Banks and GRA as primary gate keepers

Business and Financial Times

Tue 25th Nov, 2025 13:27

Dr. Richmond ATUAHENE, Banking Consultant

1.0 Background/ Introduction

International trade is a vital component of any modern economy. Exporting around the world can provide a vehicle for job creation and economic growth, and imports can often provide access to goods and services at lower cost than producing domestically. International trade involves a range of risks for the parties involved, which leads to uncertainty over the timing of payments between the exporter and importer. This creates tension along the supply chain, which can have negative consequences for both the importer and exporter. Trade processes and financing have adapted to address this tension, while still supporting the growth of the global marketplace. As such, there are five primary methods of payment for international transactions, summarised, advance payment, letter of credits, documentary collection, open account trade and consignment sales preferable for importers while exporters least preferable for consignment sales, open account trade, documentary collection, letters of credit and advance payment.

According to Financial Action Task Force (FATF ,2020) noted that open account and documentary collections as being the most prominent in their TBML while the Wolfsberg Group (2017) notes approximately 80% of international trade processed by financial institutions handle open account trading in trade -based money laundering. However, just because this overview does not reference other types of trade finance, this does not mean they aren’t exploited in TBML schemes. Nevertheless, as a method for systematically disguising the proceeds of crime, an importer routinely paying cash in advance is likely to arouse the suspicion of authorities or financial institutions.

International trade is a powerful tool to advance development and reduce poverty. The international trade system is subject to a wide range of risks and vulnerabilities, which provide criminal organizations with the opportunity to launder the proceeds of crime and provide funding to terrorist organizations, with a relatively low risk of detection. The relative attractiveness of the international trade system is associated with: • the enormous volume of trade flows, which obscures individual transactions and provides abundant opportunity for criminal organizations to transfer value across borders; • the complexity associated with (often multiple) foreign exchange transactions and recourse to diverse financing arrangements; • the additional complexity that can arise from the practice of commingling illicit funds with the cash flows of legitimate businesses; • the limited recourse to verification procedures or programs to exchange customs data between countries; and • the limited resources that most customs agencies have available to detect illegal trade transactions (FATF; 2006).

The international trade system is clearly subject to a wide range of risks and vulnerabilities that can be exploited by criminal organizations and terrorist financiers. In part, these arise from the enormous volume of trade flows, which obscures individual transactions; the complexities associated with the use of multiple foreign exchange transactions and diverse trade financing arrangements; the commingling of legitimate and illicit funds; and the limited resources that most customs agencies have available to detect suspicious trade transactions.  At the same time, trade is attractive for money laundering because of the complexity and volume of international trade and trade financing instruments, which can be used to hide the origin of individual transactions and make trade-based money laundering (TBML) challenging to identify and prevent. Trade-based money laundering is the practice of hiding illegal sources of money by moving it through trade transactions to make it appear like they come from legitimate activities. It involves the transfer of funds, or value, across borders and relates directly to criminal or terrorist activity, helping to fund such activity, or helping to move or hide proceeds originating from criminal activity. Trade can enable the movement of large amounts of money in a single transaction, making it attractive to criminals and terrorists seeking to launder funds

In many countries though, trade also contributes significantly to government revenues. Taxes on imports have historically been an important revenue source for many countries around the world; however, in line with a consensus that import taxes are harmful to economic growth, reliance on them has declined over time (. Besley and Persson, 2013). However, taxes on imports remain important in many low- and middle-income countries (LMICs), where a lack of administrative capacity and information on domestic transactions presents a challenge to domestic enforcement (Lee and Gordon, 2005; Besley and Persson, 2014). International trade finance process makes it possible and easier for exporters and importers to transact business through international trade.

Moreover, it facilitates the introduction of third-parties to transactions to eliminate payment- and supply-related risks. The phrase, trade finance, is also used to refer to financial instruments and products utilized by companies to facilitate international trade and commerce. Undoubtedly, trade finance accounts for the enormous growth in international trade activities and values over the years.

Illicit financial flow remains a major threat to both the international trade and global financial systems; perpetrators of these criminal activities employ adept tactics and strategies towards achieving their objectives. To illustrate, available statistics from the United States Customs and Border Protection (as cited in Napier, 2023) affirmed on a typical day in 2019, about 79,000 containers; and US$7.3 billion worth of goods entered the United States of America through various ports. Given the dynamic nature of international trade, including the diversity of tradable goods and services, the involvement of multiple parties, and the speed of trade transactions, TBML remains a profound and significant risk. For context, the WTO Statistical Review of 2019 notes the volume of the global trade in world merchandise (i.e. goods) trade grew by 3% in 2018, while the value of that trade increased by 10% to USD19.67 trillion, driven, in part, by a significant growth of fuels and mining products, at 23%.

This growth may resonate with several respondents noting the exploitation of fuels and mining products in TBML schemes. The report also noted that world exports of merchandise trade increased 20% in value over this period (FATF – Egmont Group, 2020). The scale of trade-based money laundering (TBML) points to a serious problem. The think tank Global Financial Integrity estimates the gap between developing and advanced economies export and import “value gap” declarations at $8.7 trillion for 2008–2017.

 The “global value gap” reflects the unexplained difference between officially reported import and export flows involving countries that trade together and serves as a good proxy to measure potential trade-based money laundering (Asian Development Bank no 312/2024). The World Economic Forum estimates that the economic and tax losses from trade-based money laundering in developing countries alone exceeded US$9 trillion between 2008 and 2017. Trade mis-invoicing as defined by Forstater (2018) is the customs and/or tax fraud involving exporters and importers deliberately misreporting the value, quantity, or nature of goods or services in a commercial transaction. Baker, Clough, Kar, LeBlanc, and Simmons (2014) identify four basic categories of trade mis-invoicing; import under-invoicing, import over-invoicing, export under-invoicing, and export over-invoicing.

Key typologies of trade-based money laundering (TBML) in Ghana involve

hiding illicit money in ordinary trade transactions through methods such as phantom shipments, under- and over-invoicing, and the use of falsified invoices and documentation. Recent reports have highlighted vulnerabilities within key institutions like the Ghana Revenue Authority’s (GRA) Customs Division and commercial banks that enable these activities. Ghana has experienced trade mis-invoicing in each of the four categories, with the highest levels being in export under-invoicing and import under-invoicing (Baker et al., 2014). Under-valued exports are interpreted as evidence of illicit outflow of financial capital from the exporting country (Hong & Pak, 2017).

On the other hand, overvalued exports are interpreted as evidence of illicit financial inflows whereby financial capital enters the exporting country through the trade channel. Inward IFFs comprise the sum of import under-invoicing values and export over-invoicing values while outward IFFs comprise import over-invoicing and export under-invoicing.

 A report released by the Global Financial Integrity (GFI,2015) estimated the IFF losses due to trade mis-invoicing in Ghana for both imports and exports as $3.2 billion in 2015 (GFI, 2019). GFI (2019) further provided that Ghana lost $758 million in import over-invoicing, $722 million to import under-invoicing, $117 million to export over-invoicing, $1.6 billion to export under-invoicing. In total the report estimated the IFF inflows by trade mispricing to be 837 million dollars and outflows US$2.38 billion.

These data had validated the prolonged nature of trade -based money laundering that had existed the country. The recent Phantom Shipment of US$42 billion clearly showed that both Ghanaian banks and GRA (Custom Division) had failed woefully as primary gatekeepers in the ML/CFT space due to insufficient training, the constantly evolving and sophisticated nature of financial crimes, and a focus on balancing risk versus profit, which sometimes led to a lack of enforcement. Banks and GRA had all failed as the primary gatekeepers in the trade -based money laundering space due to inadequate technology, insufficient resource allocation, and weak internal controls and poor governance. Poor regulatory oversight had significantly contributed to the arising of money laundering (ML) and terrorist financing (CFT) by creating vulnerabilities and loopholes within the financial system that criminals can exploit.

Weak oversight meant financial institutions (FIs) had implemented inadequate or ineffective anti-money laundering and counter-terrorist financing (AML/CFT) controls, such as poor customer identification procedures and transaction monitoring systems. Poor regulatory oversight highly correlated with weak internal governance arrangements within some Ghanaian banks, including a lack of clear accountability and high staff turnover in key compliance functions, which further compromises risk management. Trade-based money laundering has emerged as the new front in West Africa’s fight against illicit finance, as regulators warn that criminal networks are exploiting trade and banking systems to move billions of dollars across borders undetected.

The problem’s scale is staggering. Data reviewed by Business & Financial Times revealed that between April 2020 and August 2025 commercial banks in Ghana alone facilitated about US$20billion of foreign transfers without corresponding imports. The transactions, representing roughly GH¢31billion, were made through import declaration forms that failed to meet documentation thresholds set by the Bank of Ghana. Some financial analysts have said that several banks processed multiple transfers for the same clients despite red flags, suggesting weak compliance oversight. Less than two percent of all transfers during the five-year period were matched with actual imports, resulting in about GH¢22.6billion of estimated revenue losses from unpaid duties and taxes (Amalanu, BFt /06/11/2025). Ghana made significant revenue loss from 2020 to 2025, commercial banks in Ghana processed about $20 billion in foreign transfers without corresponding import documentation. This resulted in an estimated revenue loss of over GH¢22.6 billion from unpaid duties and taxes.

This Phantom Shipment of US$42 billion clearly showed that Ghanaian banks and GRA (Custom Division) have failed woefully as primary gatekeepers in the ML/CFT space due to insufficient training, the constantly evolving and sophisticated nature of financial crimes, and a focus on balancing risk versus profit, which sometimes led to a lack of enforcement. Banks have failed as the primary gatekeepers in the Money Laundering (AML) and Counter-Financing of Terrorism (CFT) space due to inadequate technology, insufficient resource allocation, and weak internal controls and poor governance. Poor regulatory oversight had significantly contributed to the arising of money laundering (ML) and terrorist financing (CFT) by creating vulnerabilities and loopholes within the financial system that criminals can exploit.

Weak oversight meant financial institutions (FIs) had implemented inadequate or ineffective anti-money laundering and counter-terrorist financing (AML/CFT) controls, such as poor customer identification procedures and transaction monitoring systems. Poor regulatory oversight highly correlated with weak internal governance arrangements within some Ghanaian banks, including a lack of clear accountability and high staff turnover in key compliance functions, which further compromises risk management. Criminals had exploited weak systems in the international trade architecture.  These activities had thrived due to weaknesses in Ghana’s financial and trade ecosystem, including inadequate technology, fragmented data across agencies, limited expertise in TBML, and inconsistent enforcement. These vulnerabilities have also been identified by the Financial Intelligence Centre and the Bank of Ghana

2.0 Literature Review

Trade-based money laundering has received considerably less attention in academic circles than the other means of transferring value. The literature has primarily focused on alternative remittance systems and black- market peso exchange transactions. However, a number of authors and institutions, including Baker (2005), de Boyrie, Pak and Zdanowicz (2005), the Department of Homeland Security, US Immigration and Customs Enforcement (2005), have recently examined a range of other methods used to launder money through the international trade system as well as the scope that jurisdictions have to identify and limit these activities.

Trade-based money laundering (TBML) is the process of disguising the proceeds of crime by moving value through trade transactions to legitimize their illicit origins via misrepresentation of the price, quantity or quality of imports or exports (FATF, 2006). It may involve the use of legitimate international trade systems to transfer value through over- or under-invoicing (invoicing the goods at a price above or below the fair market price), over- or under-shipment (overstating or understating the quantity of goods being shipped or services being provided), or falsely describing the quality of goods and services. In the case of services, due to difficulties associated with measurement and a lack of consistent prices, the same service may be invoiced multiple times. It is not apparent when the term “TBML” was first coined; Zdanowicz (2009) attributes it to research conducted between the 1960 and 1980s when abnormal international trade pricing patterns prompted suspicions that money was illegally being transferred across borders. Pre-2006 peer-reviewed academic literature has highlighted illicit practices within trade transactions (Bhagwati, 1974; De Wulf, 1981; Zdanowicz, 2004).

However, the focus of this scholarship was not exclusively on identifying TBML but rather on highlighting other types of financial crimes that occur through trade transactions. For example, Soudijn (2014) pointed out that overstating the value of goods to obtain export subsidies constitutes subsidy fraud, not TBML. In other words, TBML did not feature in the peer-reviewed scholarship; at best, it was discussed peripherally (Waszak, 2004) Consequently, after the Financial Action Task Force (FATF) published its TBML report in 2006, the concept gained prominence (FATF, 2006; FATF, 2008; FincCEN, 2010; Liao and Acharya, 2011; Sullivan and Smith, 2011). TBML has emerged as a typology used by organized crime groups, white-collar criminals and terrorist organizations, such as Hezbollah, to launder funds. These entities may use TBML to hide profits, pay bribes and move value to lower taxation zones (O’Halloran et al., 2018; Rollins and Wyler, 2011). In terms of terrorist organizations, there is a conceptual delineation that must be made. As we are explicitly discussing money laundering, we only consider terrorist organizations using trade to “clean” illicitly obtained funds, not typical terrorist financing and resourcing activities such as Hawala (Razavy, 2005).

For instance, cars and other goods are purchased using drug proceeds from the United States and shipped to countries in West Africa; sale proceeds are sent back to Lebanon with help from colluding exchange houses (O’Halloran et al., 2018; Rollins and Wyler, 2011): this activity employed by Hezbollah would fall under the TBML definition given the purpose of trade stream exploitation was to obfuscate the origin of the drug money. In other words, TBML must start with dirty money that requires “cleaning”. Trade-based terrorism financing should not be conflated with TBML (Sinha, 2013). Motivated by the complexity and magnitude of TBML, this study aims to examine the peer-reviewed literature on TBML, identify gaps, and direct attention towards addressing them to propel further study. Notably, the desire for financial gain serves as a significant driving force for illicit actors to engage in money laundering, including TBML (Byrne, 2011). As a result of the strong link between money and crime (Canhoto, 2020), accounting knowledge becomes critical to manage the huge capital accumulation resulting from such crimes (Compin, 2008). Stack (2015c) analyzed the role of shell companies in Latvian-type correspondent banking and resulting money-laundering operations. He examined financial flows from Russia and the former Soviet Union and highlighted the use of shell companies in movement of funds from those associated with corruption and organized crime. He found that these entities moved funds from Russia, Ukraine and other Soviet countries through international correspondent banking relations to offshore savings accounts and business supplier

 Consequently, an increasing amount of illicit funds needing to be laundered increases the importance of accountants in detecting and reporting money laundering (Habib et al., 2018; Mitchell et al., 1998a, b; Neu et al., 2013; Ravenda et al., 2017, 2018). This paper directs attention towards the proceeds of crime being laundered through trade, directly affecting the role of accounting and accountants in society (Murray, 2018). Given the growing prominence of TBML in disguising illicit funds and role of accountants in combating illicit flows, a literature review on TBML enhances accountants’ understanding of the subject matter, including the identification of red flags, associated challenges, the need for skill development and required training for its effective detection. Trade based money laundering typologies on mis-invoicing and transfer mispricing are two concepts under trade mispricing (Rojas, 2020). For this paper, the discussion in this chapter is restricted to the concept of trade mis-invoicing. Rojas (2020) describes this as the false report of the value, quantity, or nature of the exported or imported goods and services in a commercial transaction.

This practice is a form of customs and/or tax fraud that is used to evade tariffs, other taxes, and trade restrictions on particular commodities or countries’ taxes. Again, according to (WCO, 2018), trade mis-invoicing is one of the primary methods of laundering money for illegal transfer to another country. Cobham and Jansky (2017), posit that trade mis-invoicing occurs when exporters understate the value of exports and importers overstate the value of import, and is attributed to the desire of firms to evade trade restrictions and customs duties by illicitly shifting profits between countries. As identified in the previous chapter, Baker et al. (2014) highlight four strands of trade mis-invoicing. Export under-invoicing occurs when the amounts of exports leaving a country are under-reported to evade or avoid taxes on corporate profits in the country of export by having the difference in value deposited into a foreign account. Similarly, export over-invoicing involves over-stating the amounts of exports leaving a country, which often allows the seller to reap extra export credits or avoid capital controls or anti-money laundering scrutiny. On the import side, traders often under-report the amount of imports in a transaction to circumvent applicable import tariffs and value-added tax.

Over-reporting imports, they are often doing so to legitimize sending out additional capital under the guise of legal trade payments. Import over-invoicing disguises the movement of capital out of a country (Baker et al., 2014). The above definitions demonstrate that the misrepresentation of a value, in the form of either undervaluation or overvaluation is a strand of trade mis-invoicing. Ahene-Codjoe et al. (2020) discovered using the London Bullion Market Association (LBMA) daily price series for gold that Ghanaian exports are undervalued by approximately 10% of the total value of gold exported (USD35.6 billion). The undervalued amount thus constitutes USD 3.5 billion below the contemporaneous London market prices adjusted for the purity of Ghanaian gold production. Hausermann and Ferring (2018) argue that foreign companies have taken advantage of loopholes in the acquisition of licenses to operate on small-scale mining concession sites. These companies have taken advantage of administrative and technical irregularities and have stretched the involvement beyond the provision of technical support to the complete operation of mining concessions. To a large extent, the recent trouble with illegal mining primarily exposes a failure of management over one of the country’s main natural resource exports-gold (Nwokolo, 2019).

In Ghana, under-declaring the amount or value of gold exported is one mechanism known to facilitate smuggling. Sometimes, false receipts are used to downplay the quality and quantity of gold exported (Hunter, 2020). “Sometimes, false receipts are used to downplay the quality and quantity of gold exported,” is a claim supported by research in the field of illicit financial flows and gold trading, attributed to a source by “Hunter (2020)”. The 2020 research by Hunter suggests that such fraudulent practices, often in the artisanal and small-scale gold mining (ASGM) sector, contribute to trade-based money laundering and illicit financial flows (IFFs). Since the preceding chapter analyses the concept of trade mis- invoicing, this section discusses pure smuggling rather than technical smuggling.

3.0 Global perspective of Trade Based Money Laundering

TBML, as defined in the 2006 FATF report, is “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illegal origin or finance their activities. Trade-based money laundering (TBML) is the process of disguising the origin of illicit funds by using legitimate trade transactions, such as imports and exports. Criminals achieve this by manipulating the value, quantity, or quality of goods through methods like over-invoicing, under-invoicing, or misrepresenting the goods themselves, which conceals the movement of money under the guise of commerce. Trade-Based Money Laundering (TBML) is one of the most prevalent money laundering methods encountered by global financial sector. This method primarily involves exploiting the vast volume of global trade and the complexities associated with foreign exchange and cross-border transactions. Given the significant threats posed to compliance, it is crucial for professional firms to understand and address the challenges of TBML. Finally, we will outline strategies for detecting TBML and best practices for AML/CFT to mitigate the potential risks. Trade-Based Money Laundering (TBML) is a sophisticated method used by criminals to execute the three stages of money laundering: Placement, Layering, and Integration. This process often intertwines global and local trade activities, allowing illicit funds to be disguised as legitimate business transactions. Criminals manipulate trade documentation and exploit logistics processes, frequently using advanced payment settlement options or financing solutions. The complexity and volume of international trade transactions present significant challenges for traditional detection systems. Distinguishing between legal and illegal activities becomes increasingly difficult, especially when trade networks involve middlemen, shell companies, and diverse payment methods. This allows criminals take advantage of the limited resources available for detection, complicating the efforts of authorities to trace and combat financial crime. Criminals use trade-based money laundering to disguise the proceeds of crime and move value via trade transactions that attempt to legitimize their illicit origins. This process typically involves exploiting the international trade system to transfer value while obscuring the true sources of wealth. By manipulating various aspects of trade transactions, such as pricing, quantity, and documentation, criminals can effectively launder money and integrate it into the legitimate economy. FATF – Egmont Group (2020) noted that open account and documentary collections as being the most prominent in their TBML analysis and investigation activities. In fact, the Wolfsberg Group notes approximately 80% of international trade processed by financial institutions is open account trading. However, just because this overview does not reference other types of trade finance, this does not mean they aren’t exploited in TBML schemes. Nevertheless, as a method for systematically disguising the proceeds of crime, an importer routinely paying cash in advance is likely to arouse the suspicion of authorities or FIs.

a…Open account

The United Nation’s Trade Facilitation Implementation Guide notes that an “open account transaction is a sale where the goods are shipped and delivered before payment is due”. Payment is usually made by a set time period, anywhere between 30 and 90 days after receipt of the good or service. TBML schemes frequently involve this method because financial institutions have a reduced role, meaning less oversight than for the documentary collection process. Financial institutions can struggle to accurately or consistently asses the legitimacy of the customer’s operations, whether through automated or manual transaction monitoring

b…Documentary collections

In documentary collection, the exporter requests payment by presenting shipping and collection documents for the traded goods to its financial institution. The financial institution then forwards these documents to the importer’s financial institution, who then transfers the funds to the exporter’s financial institution, who will subsequently credit those funds to the exporter. However, despite a perceived increase in role for FIs, it is limited as they do not necessarily verify the documents. In addition, documents are not always standardized, increasing the risk of TBML exploitation through fictitious or false invoicing. However, when these documents can be checked and assured, certain data points can be used to spot TBML, including: • Use of a personal email address in lieu of a legitimate business email. • Subject to financial institution’s data storage capabilities, the obvious recycling of previous documentation with few or no edits, including something as basic as the date.• The complete lack of any trading presence of the exporter, following research by the financial institution. This included the use of residential rather than business premises for exporters providing significant quantities of goods

4.0 Stages of Trade Based-Money Laundering

The three stages of trade-based money laundering (TBML) are placement, layering, and integration, which are the same as traditional money laundering but applied to trade finance. In TBML, criminals manipulate trade to launder money by using methods like over/under-invoicing, misrepresenting goods, and multiple invoicing to obscure the origin of illicit funds before integrating them back into the legitimate economy

a…Placement Stage

Criminals introduce illicit cash into the financial system through a trade transaction.This can be achieved by paying for goods and services with dirty money, often using physical cash deposits that are small enough to avoid triggering alerts. Activities related to trade-based money laundering are cunningly advanced in three main stages. These include placement, layering and integration stages. At the placement stage, criminals draw on their skill or cleverness to ensure proceeds of illegal activities are introduced to the mainstream and legitimate financial system. By inflating the value of goods in trade transactions and creating artificial profits, the criminals ensure these profits are transferred to foreign bank accounts

b…Layering Stage

The money is then moved through a series of complex transactions to obscure its origin.

In TBML, this involves manipulating trade documents like invoices and bills of lading.

The techniques include: over/under-invoicing: Invoicing goods at a price higher or lower than their actual value, multiple invoicing: Using the same invoice multiple times to justify multiple payments for the same shipment, misrepresenting goods: Falsely describing the quality, quantity, or type of goods being traded. Criminals create complex web of transactions at the layering stage; and this facilitates their separation of illicit funds from the original source. True ownership of the funds is concealed through creation of shell companies; issuance of false invoices; and mislabeling of goods.

c…Integration Stage

The money is reintroduced into the legitimate economy, appearing to have a legitimate source.

This can be done by purchasing assets like real estate or stocks using the “cleaned” funds. In TBML, this is the final step where the manipulated trade transactions make the money seem like a legitimate profit from trade activities The integration stage relates to where the perpetrators draw on their ‘ingenuity’ to reintroduce laundered funds back into the legitimate financial system. The strategies adopted and utilized by the criminals make it difficult for law enforcement agencies to effectively trace the origin of the illicit funds. This criminal activity may be executed through the purchase of high-value goods such as luxury vehicles or artworks, bank transfers, and purchase of real estate.

5.0 The FATF 2006 report identified several techniques that form the foundation of TBML:

• Over- and under- invoicing of goods and services: The key element of this technique is the misrepresentation of the price of the good or service, in order to transfer value. In this type of arrangement, the critical enabling aspect is that the importer and exporter are complicit in the misrepresentation. This technique involves overstating or understating the price of goods or services in trade invoices. By inflating the invoice amount, criminals can transfer excess funds under the guise of legitimate transactions, while under-invoicing allows them to move money out of a jurisdiction without attracting scrutiny.

• Multiple invoicing of goods and services: This doesn’t require the misrepresentation of the price; rather it centers on the reuse of existing documentation to justify multiple payments for the same shipment of goods or delivery of services. Criminals or terrorist financiers exploit this further by reusing these documents across multiple FIs, making it difficult for one institution to identify it. Criminals may issue multiple invoices for the same shipment of goods. This tactic enables them to justify multiple payments while referencing a single transaction. Such manipulation complicates the tracking of funds and obscures the true nature of the transaction.

• Over- and under- shipment of goods and services: As above, this involves the misrepresentation of the quantity of goods or services, including ‘phantom shipments’ where no product is moved at all. Again, it relies on collusion between the importer and exporter. “Phantom Shipment” is a fraudulent trade practice where a shipment is faked to move money illicitly, often as a form of trade-based money laundering. It involves creating a bogus transaction with fraudulent documents to make it appear that goods were shipped, but no actual goods are moved, or they are shipped for different purposes than stated. This is a form of trade-based money laundering where the primary goal is to launder money, not to trade goods

• Falsely described goods and services: This involves the misrepresentation of the quality or type of a good or service, such as the shipment of a relatively inexpensive good, which is described as a more expensive item, or an entirely different item, to justify value movement. Misrepresenting the nature or quality of goods in trade documents is another common method. By providing inaccurate descritions, criminals can disguise the illicit movement of funds, making it challenging for authorities to detect suspicious activities.

6.0 FATF/OECD and Egmont Group of Financial Intelligence Units (2021) noted following red flags in the trade -based money laundering:

1. Documentation Inconsistencies

   Discrepancies in trade or customs documentation, such as missing, forged, or frequently modified documents including bill of ladings, airway bills

2. Complex Structures

   Suspicions should arise when multiple intermediaries or shell companies are utilized to obscure the source of funds.

3. Abnormal Supplier and Customer Activities

   Frequent, unexplained changes in suppliers or unclear business relationships may indicate efforts to obscure audit trails and launder money through trade transactions

4. Pricing Inconsistencies

   Significant deviations in item pricing from market rates or erratic fluctuations can indicate TBML activities.

5. Operating in High-Risk Jurisdictions

   Businesses situated in jurisdictions with weak anti-money laundering (AML) controls or identified as high-risk for money laundering require heightened scrutiny of their financial activities and trading practices.

6. Inconsistent Client Business Activity

   If a client’s activities deviate from their typical business operations, automated detection alerts should be triggered, and pre-inspections by knowledgeable officials are recommended

7. Heavy Use of Cash Payments

   An excessive reliance on cash, especially when followed by international fund transfers or third-party involvement in settling invoices, may signal the introduction of illicit cash

8. Inconsistent Client Business Activity

   If a client’s activities deviate from their typical business operations, automated detection alerts should be triggered, and pre-inspections by knowledgeable officials are recommended.

9. Fraudulent or Tampered Documents

   Any signs of fraudulent or tampered documents, including false shipments, should prompt post-transaction alerts and thorough reporting, with pre-inspections by knowledgeable officials.

10. Payments to Third Parties or Unrelated Entities

    Transactions involving payments to unrelated parties should be flagged for post-transaction alerts and require pre-inspections by knowledgeable officials.

11. Address Inconsistency

    Identical addresses for beneficiaries, applicants, drawers, payers, or related parties should trigger alerts, necessitating post-transaction reporting and pre-inspection by knowledgeable officials.

12. Material Discrepancies in Trade Documents

    Material discrepancies in trade documents should be flagged through pre-trade alerts and require partial automated detection, with pre-inspections recommended

13. Unverified or Fake Letters of Credit (LC)

    Detection of unverified or fake LCs should involve pre-transaction checks and partial automation, with physical inconsistencies cross-checked by knowledgeable officials.

14. Large Amount Submissions/Payments

    Transactions involving unusually large amounts should trigger post-trade alerts and automated reporting.

15. Large Overdraft Letters of Credit

    Letters of credit exceeding their stated value should undergo automatic detection or manual review prior to transaction completion.

16. Bills of Lading with Future or Pre-Specified Dates

    Bills of lading dated for future or pre-specified times should be subject to pre-trade checks and automated detection or manual reviews

     17.Transactions with Unusual Payment Method

Criminals seeking to avoid scrutiny often resort to unconventional or non-standard payment methods in their trade transactions. These methods, which can include third-party payments, cash transactions, or crypto-currencies, make tracing the origin and movement of funds more challenging

17. Inconsistent Documentation or Paperwork

Inconsistent or incomplete documentation, such as discrepancies in trade, financial, or shipping documents, can be a sign of TBML. Launderers often forge or alter documents. By thoroughly reviewing documentation for inconsistencies and ensuring that all paperwork is complete and accurate, money services businesses can detect potential TBML activities and take appropriate action.

18. Multiple Transactions beneath threshold limits

Threshold limits are predefined monetary amounts set by regulatory authorities, above which financial institutions must report transactions to relevant agencies. For example, money services businesses must file a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN) for cash transactions exceeding $50,000 daily by or on behalf of one person. Criminals often attempt to circumvent these reporting requirements by conducting multiple transactions beneath the threshold limits. By keeping transactions below these limits, they aim to avoid triggering alerts or attracting attention. This tactic, known as “structuring” or “smurfing,” is one of the three stages of money laundering and involves breaking down large transactions into smaller amounts to make them appear less suspicious

           20.High-Risk Countries or Entities

High-risk jurisdictions may have weak AML regulations or known connections to financial crimes, making them attractive money laundering destinations for criminals. Businesses should be cautious when dealing with counterparties in such jurisdictions and should conduct enhanced due diligence to mitigate potential risks.

19. Multiple Unusual Transactions with the Same Counterparty

Repeated transactions that deviate from normal patterns or involve unusual terms and conditions with the same counterparty may suggest TBML activity. Criminals often collaborate with trusted associates to launder money, and these unusual transactions can serve as a means to move illicit funds.

20. Heavy Use of Foreign Cash Payments

    An excessive reliance on foreign cash, especially when followed by international fund transfers or third-party involvement in settling invoices, may signal the introduction of illicit cash.

21. Unverified or Fake Letters of Credit (LC)

    Detection of unverified or fake LCs should involve pre-transaction checks and partial automation, with physical inconsistencies cross-checked by knowledgeable official

22. Unverified or Fake Letters of Credit (LC)

    Detection of unverified or fake LCs should involve pre-transaction checks and partial automation, with physical inconsistencies cross-checked by knowledgeable officials.

23. Large Amount Submissions/Payments

    Transactions involving unusually large amounts should trigger post-trade alerts and automated reporting.

24. Large Overdraft Letters of Credit

    Letters of credit exceeding their stated value should undergo automatic detection or manual review prior to transaction completion.

25. Bills of Lading with Future or Pre-Specified Dates

    Bills of lading dated for future or pre-specified times should be subject to pre-trade checks and automated detection or manual reviews

26. Operating in High-Risk Jurisdictions

    Businesses situated in jurisdictions with weak anti-money laundering (AML) controls or identified as high-risk for money laundering require heightened scrutiny of their financial activities and trading practices.

27. *Inconsistencies across contracts, invoices or other trade documents,g. contradictions between the name of the exporting entity and the name of the recipient of the payment; differing prices on invoices and underlying contracts; or discrepancies between the quantity, quality, volume, or value of the actual commodities and their descriptions.

28. * Trade activity is inconsistent with the stated line of business of the entities involved,g., a car dealer is exporting clothing or a precious metals dealer is importing seafood.

29. * Trade entity engages in complex trade deals involving numerous third-party intermediaries in incongruent lines of business.

30. * Trade entity engages in transactions and shipping routes or methods that are inconsistent with standard business practices

31. * Trade entity makes unconventional or overly complex use of financial products, g. use of letters of credit for unusually long or frequently extended periods without any apparent reason, intermingling of different types of trade finance products for different segments of trade transactions

7.0 Global role of Banking Institutions as Primary Gate Keepers in the Fighting against Money Laundering and Terrorist Financing

Globally, Banks develop and continuously strengthen their gatekeepers’ role in ML/CFT that involves enhancing their internal controls through robust risk assessments, clear policies, and comprehensive employee training. It also requires effective public-private partnerships for information sharing, leveraging technology like advanced analytics for better risk identification, and aligning international standards and regulatory frameworks like those from the FATF. Banks must adhere to international standards and frameworks like those from the Financial Action Task Force (FATF) to ensure harmonized regulations and effective cooperation across border Banks and other financial institutions must enhance internal controls and capabilities by conduct thorough risk assessments specific to the gatekeeper’s business to identify vulnerabilities, establish clear, risk-based policies and procedures for anti-money laundering and counter-terrorist financing (AML/CFT), implement thorough CDD procedures, EDD procedures including verifying customer information and understanding beneficial ownership and Set up systems for monitoring transactions and a clear process for reporting suspicious activity to the Financial Intelligence Center.

Banks must conduct a thorough and regularly updated assessment to identify and understand the specific money laundering, terrorism financing, and proliferation financing risks the organization faces. This assessment should consider various factors such as customer types, services offered, geographic locations of operation, and delivery channels.  Implementing systems and controls to ensure the AML/CTF program is effectively executed and adhered to across the organization. These controls should support the policies and procedures and ensure ongoing compliance.  Banks in the country must implement risk-based approaches (RBA) where resources efficiently by focusing on high-risk clients, products, and geographies. This ensures that effort is directed where it is most needed, particularly for smaller firms with resource constraints. A robust RBA requires an organization-wide risk assessment that is regularly updated. Banks must regularly undertake a comprehensive risk assessment involves several key considerations: ? identifying risk factors: Pinpointing the specific aspects of the business that might make it vulnerable to ML/TF. Factors to consider include the types of clients, the geographical areas of operation, the services offered, and the delivery methods of service, analyzing risk levels: After identifying risk factors, the next step is to analyze the risk associated with each factor. This involves evaluating and analyzing likelihood of the risk occurring and its potential impact on the business.? understanding inherent Risks: Gaining an in-depth understanding of the inherent ML/TF risks specific to the gatekeeper profession and the individual business. This understanding forms the basis for developing targeted and effective mitigation strategies.

Banks must go beyond basic identity verification to understand the nature and purpose of business relationships. For higher-risk clients, such as politically exposed persons (PEPs) or those from high-risk jurisdictions, Enhanced Due Diligence (EDD) measures must be applied. Ghanaian banks must continuously monitor client transactions for unusual or suspicious patterns that deviate from a client’s profile. This can involve automated systems that flag transactions based on pre-defined criteria, as well as manual reviews. Banks must implement automated screening against sanctions lists, PEP databases, and adverse media reports. Automated solutions are especially beneficial for smaller firms, as they reduce manual effort and human error. Banks must strengthen external collaboration and technology by fostering close partnerships with Central Banks, Financial Intelligence Units and law enforcement agencies to enable information and resource sharing. Banks must leverage technology, such as big data and predictive analytics, to identify emerging threats and enhance risk detection capabilities. Using innovative solutions like big data analytics, AI, and machine learning to improve the speed and accuracy of AML/CFT measures. These tools can be used for tasks such as screening clients against watchlists, monitoring transactions, and identifying patterns of illicit activity.

Banks must develop comprehensive AML/CFT training and compliance culture. Develop and deliver regular, comprehensive training programs for all employees. Training should cover AML/CFT obligations, the latest money laundering typologies, how to recognize red flags, and proper reporting. Board and Senior Management Team must develop strong culture of compliance. Encourage a culture where compliance and ethics are promoted from the top down. Senior management should set the tone by demonstrating a commitment to compliance, and employees should be encouraged to openly communicate and report issues. Prioritizing employee training and fostering a strong culture of compliance are critical for effectively implementing AML/CTF measures within gatekeeper professions. Comprehensive and ongoing training ensures that all relevant employees understand their obligations, recognize potential risks, and know the consequences of non-compliance. Additionally, fostering a strong culture of compliance, where ethical conduct and adherence to regulations are valued and promoted from the top down, is equally important. Banks must establish robust transaction monitoring and Suspicious Activity Reporting (SAR) systems is a critical compliance requirement for gatekeepers. These systems are designed to detect unusual or suspicious patterns in client transactions and ensure that such activities are promptly reported to Bog and FIC. Effective transaction monitoring acts as a safeguard, helping to identify and disrupt potential ML/TF attempts.

As the primary gate keepers of ML and CFT, Banks should always form KYC policies by considering the below four components:

(a) Risk Management: Board of directors should ensure that the banks are effectively following all the procedures and norms that are implemented. Proper management teams must be set up with corresponding roles and responsibilities for each team to carry out and report any issues to the higher authorities in the bank. Every bank should have an internal audit committee and compliance team who plays a vital role in evaluating and ensures that the KYC norms and procedures are adhered. It is also the responsibility of audit committee and compliance team to evaluate and generate reports quarterly.

(b) Customer Acceptance Policy (CAP): Every bank should build clear customer acceptance policy. This policy provides in depth details of all the attributes for having customer relationship with the bank. As per the CAP, none of the anonymous accounts are to be opened. The risk perception of the client (low, medium, or high) will be categorized based on where the client is located, nature of business activity, turnover, mode of payments and their financial status and the required documents need to be obtained, and periodic review of the client needs to be done accordingly.

(c) Customer Identification Procedure (CIP): Banks should always identify if the client is acting on behalf of the other person in the form of trustee, nominee, or an intermediary. If that is true, then necessary document needs to be submitted to the bank from the client. Banks should be aware of the ownership structure of the client and should perform necessary KYC analysis of the clients or individuals involved with the risk perspective.

(d) Monitoring of Transactions: By Constantly monitoring the clients (which is an essential part of KYC procedure) the banks can reduce the risk of uncertainty. However, the monitoring of clients depends on the type of risk it is classified under by the bank (low, medium, or high risk). Nonetheless banks should always monitor the large, suspicious, or complex transactions by setting up key indicators and should investigate the core source of these funds and monitor the clients for at least once a year.

8.0 Global role of Custom Authorities as Gate Keepers in the Fighting against Trade based Money Laundering

Customs services play a critical global role as “gatekeepers“ by acting as the primary line of defence at international borders, strategically positioned to identify, intercept, and disrupt the physical flow of illicit goods and associated funds involved in trade-based money laundering (TBML).  Customs authorities play a vital role in combating trade-based money laundering (TBML) by leveraging their unique position at the border to monitor the flow of goods and associated documentation. Their key roles and responsibilities include border control and trade regulation enforcement, data collection and analysis, physical inspection of goods, risk management, investigation and information gathering. Customs are primarily responsible for overseeing the import/export of goods, enforcing trade laws, and collecting duties and taxes. In doing so, they are strategically placed to detect anomalies in trade transactions that may indicate illicit financial flows. They gather vast amounts of data from customs declarations and accompanying trade documents (e.g., invoices). Analyzing this information for inconsistencies is crucial for identifying TBML red flags, such as mis-invoicing (over or under-valuing goods), mis-description of quantity or quality, and phantom shipments (documents without actual movement of goods). Conducting non-intrusive and, when necessary, intrusive inspections of shipments (using scanners, for example) helps verify that the actual goods match the descriptions and values declared in the documentation. Customs administrations often have the mandate to investigate customs fraud, which can lead to the detection of underlying money laundering activities. Some may have independent power to investigate money laundering cases, while others participate in joint operations with other authorities. Customs authorities are essential in the anti-money laundering system because they focus on verifying physical goods, a function financial institution typically do not perform when monitoring payments. Customs services act as gatekeepers in the fight against trade-based money laundering (TBML) by using their unique position at national borders to monitor and detect financial crime. TBML is a complex process that exploits the large volume of international trade to move illicit funds, often by manipulating the price, quantity, or quality of goods.

Key global roles and functions of Custom Services include border Interdiction, trade data analysis and physical verification of goods, risk profiling: information collection and reporting and investigation: Customs are at the “tip of the spear” in controlling the movement of goods, currency, and currency equivalents across national borders (land, sea, and air). They are responsible for detecting bulk cash smuggling and the physical transportation of monetary instruments, as outlined in Financial Action Task Force (FATF) Recommendation 32. Customs authorities have access to critical trade documents, such as customs declarations and invoices, which are essential for identifying anomalies indicative of TBML (e.g., misrepresentation of price, quantity, or quality of goods). This involves using data analytics to flag suspicious transactions. By leveraging their in-depth knowledge of international trade, goods flows, and the global supply chain, customs officials can develop advanced risk profiles to target high-risk shipments without unduly hindering legitimate trade. Customs often collect information on potential money laundering activities and are mandated to share this intelligence with relevant authorities, such as Financial Intelligence Units (FIUs) and other law enforcement agencies. While mandates vary by country, some customs services have full investigative powers to initiate and complete money laundering cases, whereas others participate in joint operations with national police and other competent authorities. Custom services are usually the primary enforcement authorities in the trade area, with a mandate to tackle crimes based on the misuse of the international trade system, including TBML. Custom services thus have in-depth knowledge of the international trade arena, the flows of goods, and international supply chains, all of which are vital for identifying and investigating TBML activities. Customs services also often have sole access to international trade documents and data, which is key to identifying TBML. Custom cargo analysis, in particular, can help detect TBML, as anomalies in this data can indicate a TBML scheme and other trade-related crimes. The role of customs services as the sentinels for illicit trade activity places these authorities in a unique position for detecting the use of international shipments for illicit purposes. At the same time, the ever-increasing volume of international trade – and the associated increase in trade data – presents a key challenge for custom services trying to identify TBML schemes and other trade-based crimes. Shipments associated with TBML represent a small fraction of the overall legitimate trade, making TBML challenging to identify. In addition, customs services must balance the analysis and inspection of cargo shipments with the need to clear shipments quickly and ensuring a viable and efficient trade framework. Other historical priorities of custom services, such as the collection of custom duties and setting tariffs, also require significant resources. Therefore, it is important to ensure that custom services have sufficient capacity to examine shipping documentation and financial intelligence provided by the domestic FIU and LEAs. The effectiveness of customs as gatekeepers is significantly enhanced through global cooperation.  The World Custom Organization promotes customs-to-customs cooperation and provides guidance, capacity building, and operational support to its 183 member administrations to combat illicit financial flows (IFFs) and TBML. The FATF sets the international anti-money laundering and counter-terrorism financing (AML/CTF) standards, highlighting the importance of customs in the TBML fight and recommending better cooperation between customs, financial institutions, and law enforcement. World Custom Organization and Egmont Group collaboration have developed the Customs-FIU Cooperation Handbook to provide practical guidance and enhance collaboration and information sharing between customs and FIUs globally, strengthening the collective ability to combat financial crime In essence, custom services serve as an indispensable front line of defense, using their unique position at national borders to disrupt illicit financial activities and safeguard the integrity of the global financial system

In summary, Customs services play a key role in combating TBML through various functions:

• Controlling the flow of goods to identify potential TBML indicators like mis-invoicing or under-shipping and phantom shipment.

• Sharing information with international bodies and law enforcement to combat TBML.

• Reporting suspicious transactions to Financial Intelligence Units.

• Adhering to international standards set by organizations like the Financial Action Task Force.

• Collaborating with the private sector to enhance anti-TBML efforts.

Despite their critical role, customs face significant challenges, including the enormous volume and complexity of global trade, resource constraints (only 1-2% of containers are physically checked), and the need to balance security efforts with trade facilitation. Criminals constantly adapt their methods, such as using new technologies or sophisticated concealment techniques, requiring continuous adaptation and enhanced training for customs personnel.

9.0 Critical Review of Banks and GRA (Custom Division) as primary gate keepers against Trade Based Money Laundering

Ghana depends largely on customs duties and taxes as the major source of revenue for financing government’s spending. Statistics show that the Customs Division of the Ghana Revenue Authority (GRA) collects 50% of all tax revenue in Ghana (Bajrachaya and Kuo, 2000). The Customs Division of the Ghana Revenue Authority is responsible for collection of import

Duty, Import Vat, Export Duty, Petroleum Tax, Import Excise and other taxes. The customs division also ensures the protection of revenue by preventing smuggling. This is done by physically patrolling the borders and other strategic points, examination of goods. As a frontline institution at the country’s borders, Customs Division also plays a key role in surmounting external aggression and maintains the territorial integrity of Ghana.

According to the Ghana Revenue Authority’s 2023 annual report, the Customs Division contributed 27% of the total tax revenue for that year. The Domestic Tax Revenue Division accounted for the remaining 73%. In Ghana, for instance, the Customs Division of the Ghana Revenue Authority (GRA) have not been able to achieve revenue targets as a result of challenges confronting the division during clearance. This does not come as a surprise since the core mandate of the Customs Division is the collection of indirect taxes. These taxes include Import duty, Import Value Added Tax (VAT), Export Duty, Petroleum Taxes, Import Excise, among other levies. ). In spite of the immense contribution to the country’s financial envelope, there are serious governance challenges associated with the work of Custom Services. Established in 1839, the Custom Exercise Preventive Service (CEPS) was transformed under PNDC Law 144 into a semi-autonomous government agency outside the civil service in 19 98 (Kusi 1998; Ghana Customs 2008). In December 2009, the three tax revenue agencies, the Customs, Excise and Preventive Service (CEPS), the Internal Revenue Service (IRS), the Value Added Tax Service (VATS) and the Revenue Agencies Governing Board (RAGB) Secretariat were merged in accordance with the Ghana Revenue Authority Act 2009, Act 791. The mission of Customs Division is to collect, account for and protect customs, excise and other assigned indirect tax revenues in a timely manner while facilitating trade, investment and the movement of people and goods across and within the borders of Ghana (Ghana Customs 2008b). The Customs Division of the GRA was established under the Ghana Revenue Authority Act 2009 (Act 791) of the Parliament of the Republic of Ghana, and is responsible for the collection of international trade taxes, fees and levies charged on goods entering the country. In addition, the Customs Division is responsible for preventing smuggling and carrying out non-revenue functions such as enforcing laws concerning import and export restrictions and prohibitions. GRA (Custom Division) has played a vital role in combating trade-based money laundering (TBML) by leveraging their position as gatekeepers of international trade to detect anomalies and enforce regulations. They do this by using trad Read Full Story

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