US Trade and Transparency Unit targets global trade-based money laundering schemes


Combating money laundering in all its forms is a top priority for US Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) arm. ICE, an agency under the Department of Homeland Security (DHS) in the United States (US), is tasked with a broad law enforcement mission, including combating international terrorism and transnational crime.

“One significant method HSI uses to target transnational criminal organizations is to separate criminals from their cash flow,” said HSI Executive Associate Director Peter T. Edge. “Criminals are clever when it comes to concealing their profits. HSI’s aim is to decipher their schemes, arrest the perpetrators and effectively turn their criminal activity into a zero-sum game.”

HSI combats the methods criminal organizations use to launder money, move bulk cash, exploit global trade networks, conduct illicit insurance schemes and use online financial systems and Internet technologies to hide their ill-gotten gains. HSI made 6,805 separate seizures which included more than 720 million US dollars in currency seizures. “Believe it or not, but up to the late 1980s, it was perfectly legal for drug dealers to deposit suitcases full of money directly into banks with no questions asked,” said Edge.

US law enforcement lobbied for change, and the outcome was the enactment of the 1986 Money Laundering Control Act. This legislation, along with anti-money laundering (AML) standards, the Bank Secrecy Act and partnerships between law enforcement agencies, regulators and private industry, has presented a more formidable climate for money launderers. Yet, money laundering remains a serious global threat and has serious repercussions.

Money laundering begets corruption, crime and poverty, and erodes state sovereignty

Illicit currency moving through financial institutions as if it is legitimate contributes to the breakdown of the rule of law, corruption of public officials and the destabilization of economies. The International Monetary Fund (IMF) estimated in 1998 that somewhere between two and five percent of the world’s gross domestic product is laundered. That comes to between 590 billion and 1.5 trillion US dollars.

As criminal organizations accumulate wealth, they become more powerful. They pose a threat not only to public safety and national security, but also jeopardize state sovereignty and governance. Transnational criminal organizations (TCOs) may challenge state authority by direct confrontation or corruption, impose violence, violate human rights, undermine the regulation of products, threaten non-proliferation and arms embargoes, and undermine trade and commerce.

TCOs threaten governmental authority by the very nature of their crimes, which include trafficking in human beings, hazardous waste, endangered species, and nuclear material and conventional weapons, as well as stealing intellectual property and counterfeiting.

HSI partners with local, state and international law enforcement agencies and works with a number of other stakeholders, including the Financial Action Task Force (FATF), which is an inter-governmental body that leads efforts to counter criminal abuse of the international financial system.

The FATF stated in their July 2011 report titled, ‘Laundering the Proceeds of Corruption,’ that politically exposed persons (PEPs) are one of the largest categories of high-risk customers for money laundering purposes. “Corrupt PEPs have a greater need than others to ensure that specific criminal assets cannot be identified with, or traced back, to them.”

The same report stated that, “Countries with high levels of corruption achieve lower literacy rates, have higher mortality rates, and overall, have worse human development outcomes. Corruption deepens poverty…”

The complex nature of trade-based money laundering

In their efforts to minimize the risks of detection, TCOs are increasingly laundering money by exploiting the international trade system, using highly complex and sometimes confusing documentation that is associated with legitimate trade transactions.

Given the increase in global trade and the complexity of trade transactions, those with criminal intent have found the international trade environment rich in opportunity, not only to conceal illicit profits, but to move value to more regions whilst avoiding the payment of taxes, tariffs and Customs duties.

HSI’s Trade and Transparency Unit

HSI established the Trade and Transparency Unit (TTU) in 2004 to aggressively target trade-based money laundering and commercial fraud. The guiding premise of the TTU is that governments on both sides of trade transactions must be able to compare and analyse trade data to identify anomalies in a trade transaction.

In close collaboration with US Customs and Border Protection (CBP), the HSI TTU provides expertise and investigative support to HSI domestic and international offices, as well as to its US and international law enforcement partners. The TTU collaborates with financial intelligence units, identifies and examines anomalies indicative of Customs violations, and helps countries increase their investigative capabilities in combating trade-based money laundering.

“Over the years, TCOs have adapted, globalized and crafted sophisticated schemes to maximize their profits,” said Hector X. Colon, Unit Chief of HSI’s TTU. “In doing so, they have increasingly resorted to trade as a means to integrate ill-gained funds into global finance systems. In fact, trade-based money laundering is now the preferred method criminals and terrorist financiers use to move money, disguise its origins and integrate it into the legitimate economy.”

How exactly does trade-based money laundering work? Trade-based money laundering involves a variety of schemes used to disguise criminal proceeds. Tactics involve moving illicit goods, falsifying trade documents and misrepresenting trade-related financial transactions to integrate criminal proceeds.

Trade-based money laundering crimes are international trade transactions involving some type of fraudulence that could include collusion between an importer and an exporter. For instance, both companies might agree to manipulate prices by over- or under-invoicing goods and services or by issuing more than one invoice for the same international trade transaction. The scammers may also falsely describe goods and services; misrepresenting the type or quality.

Black Market Peso Exchange schemes

Another trade-based money laundering scheme that continues to thrive is the Black Market Peso Exchange (BMPE). This type of illegal transaction is a monetary exchange that gained fame in Colombia when Colombian drug traffickers used third party or professional money launderers to move, store or launder their illicit funds through trade.

Here is how it works. Colombian drug traffickers hold large quantities of US dollars derived from retail drug sales in the US. They need to exchange the US dollars for local currency that they can then use in Colombia. Meanwhile, Colombian smugglers and ‘importers’ need US currency to pay for ‘imported’ goods. However, they want to avoid government scrutiny, import duties, sales and income taxes, as well as the often less favourable exchange rates associated with the formal Colombian currency exchange mechanisms. Plus, reporting requirements would expose their smuggling operations.

The smugglers, therefore, exchange their Colombian pesos for the drug traffickers’ US currency. This illicit quid pro quo arrangement satisfies the monetary needs of both organizations, while their criminal activities remain covert. BMPE schemes are not limited to Colombia. Billions of drug dollars are laundered through BMPE schemes in the Western hemisphere and throughout the world. Commercial goods used in these value transfer schemes are predominantly manufactured in China.

Operation Fashion Police

In an HSI-led case called Operation Fashion Police, high-level third party money launderers in Mexico brokered a BMPE deal between the drug cartels and US garment stores operating in the Los Angeles fashion district. The drug cartels smuggled and sold methamphetamine and cocaine in the US and used the BMPE methods to move their illicit proceeds through a trade-based money laundering scheme involving what appeared to be the legitimate trade of the garment stores.

In September 2014, HSI Los Angeles executed more than 51 search warrants at businesses and residences in the Los Angeles metro area. Nine individuals were arrested and more than 90 million US dollars in bulk currency was seized. HSI Los Angeles also executed 34 seizure warrants on domestic bank accounts as well as on a Taiwanese-based account containing more than 37 million US dollars. In addition, two high-end vehicles valued at just over 142,000 US dollars, jewellery valued at an estimated 170,000 US dollars and double-invoiced ‘wearing apparel’ worth approximately 1.4 million US dollars were seized.

FALCON DARTTS and international data exchange

The backbone of the TTU is two-fold. One critical component is the high-technology computer system – known as the FALCON Data Analysis and Research for Trade Transparency System (DARTTS), an investigative tool that allows users to identify trade anomalies and quickly analyse huge amounts of data.

The exchange of trade data by TTUs with their international counterparts, formalized through Customs Mutual Assistance Agreements, is equally necessary in identifying trade transaction anomalies. Once anomalies are identified that indicate that trade-based money laundering may be taking place, investigations are launched.

Information-sharing partnerships are the other critical TTU component. HSI has established TTU partnerships with Argentina, Australia, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Paraguay and the Philippines. It is worth noting that HSI is the only US investigative agency that exchanges trade data with foreign countries.

In addition, in December 2013, the TTU was integrated into a division of the HSI-established National Targeting Center Investigations (NTC-I) Unit. The NTC-I is a collaborative partnership with CBP and plays a critical role in promoting border security, public safety and national security through the identification and investigation of TCOs and their attempts to undermine DHS’ border security efforts. This unity of effort has increased HSI and CBP’s ability to share information that helps identify, disrupt and dismantle TCOs and their associated networks.

The NTC-I TTU initiates and supports international criminal investigations related to Customs fraud, tax evasion, money laundering and other financial crimes. In the 2014 fiscal year, the NTC-I/TTU initiative led to the criminal arrest of 173 subjects and the seizure of more than 168 million US dollars in total assets. Three of these cases are cited as follows:

  • Counterfeit cellular phones fail to pass muster with Paraguayan Customs

In April 2014, Paraguayan Customs notified HSI Buenos Aires that they had seized counterfeit cellular phones and accessories worth an estimated manufacturing sales retail price (MSRP) of more than 5 million in US dollars. The case involved trade fraud violations, including under-valuation and inclusion of undeclared and misdeclared items. Especially relevant to this case is that the HSI TTU programme had trained Paraguayan Customs in how to target and identify illicit trends, such as the methods smugglers use to import large quantities of counterfeit, illicit and over- and under-valued merchandise into Paraguay.

  • Counterfeit nutritional supplements seized

In another case involving Paraguay Customs, the administration notified HSI Buenos Aires that they had seized 58,044 units of counterfeit nutritional supplements and personal care products with an MSRP value of more than 329,000 US dollars.

  • Counterfeit documents hide the true value of vehicles shipped to Spain

In Spain, HSI Madrid, the HSI TTU and Spanish law enforcement authorities investigated a case that resulted in the arrest of five persons on fraud and money laundering charges. The perpetrators had used counterfeit documents to fraudulently import more than 200 vehicles into Spain from different destinations, including the US. In order to avoid paying high value-added taxes and other pertinent duties, hundreds of shippers and consignees systematically undervalued and/or overvalued vehicles that were imported into Spain.

The benefits of the TTU method

HSI’s TTU programme has been recognized by the FATF as a best practice in combating trade-based money laundering. TTUs have helped partner countries in building awareness, strengthening measures to identify trade-based money laundering and improving international cooperation.

The advantages of TTU methods are many. They protect law-abiding companies from unfair trade involving intellectual property rights violations and other Customs fraud, they help countries to recoup lost revenue and, in fact, have helped identify millions of dollars in lost taxes and duties, resulting from fraudulent Customs documentation. TTUs also help enhance the quality and depth of money laundering investigations, as well as increase border security.

Another significant aspect of the work of the TTU is that it helps prevent, detect and combat corporate and government corruption, which helps to stabilize countries’ borders, international commerce and financial systems. Working with their partners, HSI’s TTU programme will continue to actively and aggressively pursue trade-based money laundering crimes.

Visit to learn more about HSI’s TTU programme.


More information