A shocking revelation is that fraudulent trade invoicing is playing a significant role in the estimated $2.2 trillion worth transnational crime that occurs repeatedly every year!
Studies indicate that in several cross-border trade transactions, misinvoicing is a way to deceptively hide either the details of goods and services transacted or the amounts transferred as consideration for the same.
Global cyber crime network has developed various types of invoice fraud and money-laundering methods which eventually pump such proceeds into the illegal trade of drugs, art, endangered wildlife, etc ., says an observer in this area of specialized crime.
Among the hardest hit in this alarmingly growing crime scenario is the financial services industry, it is felt. Experts also feel that they are the best equipped life-guards to save the industry from such attacks, due to their resources and access to new technology and modern global infrastructure.
Data also shows that at least 240-million dollars worth losses occur within the financial services industry in UK alone, every year – the bulk of it, caused by fraudulent invoicing.
Under-invoicing of the value of goods coming into a country has been a rampant menace across nations, and affects developing markets drastically.
Under-invoicing apart, misidentification of import list of goods is another menace to government authorities who monitor such transactions.
Then there’s the process of over-invoicing – yet another method of diverting funds into illegal activities.
Reports from Hong Kong indicate that the central bank in the country came down strictly on the system, to root out misinvoiced imports and curb capital outflow from China recently. The bank observed that billions of dollars of capital flight happened, as people took out their cash out of the country, illegally, to escape from the impending economic downturn in that country.
‘Trade based money laundering (TBML) has been an important component that supports transnational crime’, according to an expert who studied the subject recently and put forward the report.
Governmental enforcement must not only combat the escape routes for the frauds to getaway from the system but also sweep the entire landscape for identifying anonymous shell companies and secrecy jurisdictions.
Targeting the profits of transnational crime, and not just people and products, would be a good deterrent.
Customs officials need to be better and technology-savvy to scrutinize trade documents and identify misinvoicing. The entire network of governments, banks, auditors, customs officials and others must be fully competent and trained to capture the nuances of criminal intentions behind international trade documentation.
In this context, the research agency felt that the financial services space has a great role to play as crime-busters in this sector.
‘They could well be the life-guards watching such dangerous waters’, commented an informed analyst.