Last week, we had the privilege of hosting Jeffrey Robinson, the renowned financial crime expert and author of the seminal book "The Laundryman," for an enlightening discussion on Trade-Based Money Laundering (TBML). The session, moderated by our CEO Ben Arber, provided fascinating insights into the evolution of money laundering schemes and the critical challenges facing financial institutions today.
During the session Robinson revealed the true scale of global financial crime. "Today, there's $1 to 1.5 trillion in dirty money circulating around the world," he noted, emphasizing that "the biggest component is corporate and political corruption." This represents a dramatic increase from the $300-500 billion he identified when writing "The Laundryman" in the 1990s.
As the scale and sophistication of financial crime have grown, so too has our understanding of how these schemes operate. While advanced monitoring systems and technology play a crucial role in detection, Robinson emphasizes that at the heart of every successful investigation lies a fundamental truth about the nature of these operations.
One of the most compelling insights from the session was Robinson's emphasis on focusing on fraud rather than trying to detect money laundering directly. As he powerfully stated: "Fraud is the basis of TBML. Fraud is what makes it happen. Fraud is the heart of the matter. Not all fraud is money laundering, but all money laundering, especially TBML, has an element of fraud."
Robinson raised important concerns about how advanced technology is making illicit activity increasingly sophisticated. "AI is going to create plausible deniability geometrically greater than anything now," he warned, highlighting the growing challenge for compliance professionals. This underscores the importance of leveraging advanced technological solutions to stay ahead of criminals.
The Art of Deception
During the webinar, Robinson shared several fascinating examples of how criminals exploit legitimate business operations for trade-based money laundering. These cases demonstrate the sophistication and creativity of modern money laundering schemes while highlighting why traditional detection methods often fall short.
Robinson detailed an ingenious scheme involving luxury casino paper napkin supplies: "I would do it with paper napkins," he explained. The scheme begins by purchasing a legitimate paper manufacturing business in a small town and designing premium 4-ply linen paper napkins for high-end casinos. While the casino believes it's saving money ($1 million versus $1.1 million it was paying for regular napkins), the business maintains two sets of books - one showing $2 million in napkin sales to Las Vegas, mixing $1 million from cartel money with legitimate revenue. "Nobody looks at paper napkins. Nobody cares about paper napkins," Robinson noted, highlighting how criminals exploit overlooked aspects of legitimate business operations.
Another remarkable case was a sophisticated insurance scheme where a Miami company sold overpriced term life policies ($10,000 vs typical $1-2,000) to Colombian 'customers,' bundling them into million-dollar packages reinsured through tax havens such as the Isle of Man and Jersey. The scheme exploited Colombian travel regulations to obtain legitimate identities from travel agents' passport records. With a 95% first-year commission structure and no claims or renewals, cartels could launder money through premium payments while recovering most through broker commissions. As Robinson noted: "Not only does no one ever die, but no one ever re-ups.”
Robinson also highlighted how entire business districts can become hubs for TBML: "The Los Angeles Fashion District is a cesspool of trade-based money laundering." These operations often involve knock-off fashions and gold jewelry, with companies set up specifically to facilitate money laundering through fake invoices and inflated prices.
One of the earliest sophisticated TBML schemes involved the purchase of a helicopter through multiple fragmented payments. "He paid off the helicopter with 30 different payments from 22 different sources," Robinson recalled. This early example shows how criminals began moving away from simple cash transactions to more complex trade-based schemes that were harder to detect.
These examples illustrate why traditional documentation checks and transaction monitoring systems are becoming sufficient to detect modern TBML schemes. As criminals become more sophisticated and leverage advanced technology, financial institutions need to adopt more advanced detection methods that can analyze patterns across multiple data points and identify suspicious relationships that might indicate fraud.
Learn how TradeSpeed's AI-powered document examination can help detect fraudulent trade documents →https://www.complidata.io/tradespeed |
Looking Forward
While the challenges are significant, the financial industry isn't powerless. The key lies in combining human expertise with advanced technology to detect the underlying fraud that enables TBML. Financial institutions need to move beyond traditional document verification methods and embrace AI-driven solutions that can process vast amounts of data and identify suspicious patterns that might indicate fraud.
The role of compliance professionals remains crucial, but their effectiveness can be significantly enhanced by modern tools that automate routine checks and highlight potential risks. As Robinson emphasized: "Every single person in the financial world can protect their own corner. Look for the why, look for the lie, look for the exchange of money, and that's where it's happening."
The fight against TBML requires a multi-faceted approach combining human expertise, technological innovation, and institutional vigilance. While the challenges are evolving, so too are the tools and methods available to combat financial crime. By leveraging advanced AI solutions and maintaining a sharp focus on detecting underlying fraud, financial institutions can work towards creating a more transparent and secure global trade ecosystem.
A heartfelt thanks to Jeffrey Robinson for sharing his wealth of knowledge with us through such engaging stories and sharp insights. His vivid cases and candid analysis gave us all a fascinating look into how trade-based money laundering has evolved over the decades. His dedication to exposing financial crime remains as crucial today as when he first wrote "The Laundryman" thirty years ago. We're excited to see what Jeffrey uncovers next.
Want to keep up with Jeffrey's latest work and insights? Connect with him on LinkedIn https://www.linkedin.com/in/authorjeffreyrobinson/ we know we'll be following along!
Discover how TradeSpeed can help your institution detect and prevent trade-based financial crime → https://www.complidata.io/tradespeed
