Edited by Brigitte Unger and Daan van der Linde
Chapter 20: International trade mispricing: trade-based money laundering and tax evasion
This chapter contributes to the literature on trade-based money laundering, tax evasion and terrorist financing by providing an analysis of previously unused statistical techniques and methodologies as a means of monitoring, detecting and prosecuting criminal money laundering activities. The chapter describes how new statistical profiling methodologies that evaluate transactions contained in a country’s international trade database can mitigate the risks associated with trade-based money laundering. It discusses the application of four new trade-based money laundering profiling techniques which focus on country, product and transaction price risk characteristics. For years, individuals who study international trade pricing patterns have reported on the evidence that abnormal pricing in trade was being used to move money across borders, undetected by governments and law enforcement agencies. It was argued that abnormal trade pricing may be motivated by attempts to evade income taxes or import duties, or it may be related to moving ‘dirty’ money earned from criminal activities.
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