The Asian Development Bank (ADB) has published a brief entitled Transforming the Fight Against Trade-Based Money Laundering: New Data and Partnership, in which it describes a pilot project to curb trade-based money laundering (TBML) in letter of credit (L/C) transactions in Bangladesh.

Bangladesh is one of the biggest issuers of L/Cs in the world. During the pilot period, it reported a 148 per cent increase in the number of TBML-related suspicious transaction reports (STRs) filed by banks and received by authorities.

Substantial increase

Pre-pilot, the Bangladesh Financial Intelligence Unit (FIU) recorded only 63 TBML-related STRs from 2020 to 2021, which represents an average of 31.5 STRs annually.

During the pilot, Bangladesh FIU saw an increase of 117 TBML-related STRs from January 2022 to June 2023. Ten commercial banks in Bangladesh participated in the pilot.

High risk goods and markets

The pilot identified goods at higher risk of being used in TBML schemes, including capital machinery and non-essential high-tax products, ranging from large screen smart TVs to wines and agricultural products.

It also identified Bangladesh's trade links that might require ongoing scrutiny in terms of potential TBML exposure. Trade links with the British Virgin Islands, Hong Kong, China, India, Singapore, Thailand, the UAE and the US were identified as requiring ongoing scrutiny.

TBML methods

Bangladesh FIU identified quantity and price manipulation as two of the common techniques used in TBML operations.

The higher numbers of TBML-related STRs and improved quality and detail in STRs have been attributed to the pilot. Meanwhile, the pilot's multiple training sessions, and the Bangladesh FIU's relatively early launch of TBML guidelines in 2019, contributed to the results.

The ADB publication, Transforming the Fight Against Trade-Based Money Laundering: New Data and Partnerships, can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.