Financial Crime World

Title: Unmasking Trade-Based Money Laundering in Saudi Arabia: Six Convictions and the Complex Web of TBML schemes

This article discusses a major development in the war against Money Laundering in Saudi Arabia, where six individuals were convicted for their involvement in a Trade-Based Money Laundering (TBML) scheme. The case highlights the intricate nature of TBML schemes, presenting a significant challenge for countries around the world to root out financial crimes hidden within legitimate trade transactions.

Significant TBML Conviction in Saudi Arabia

In 2022, the Saudi Arabian court ruled on a Trade-Based Money Laundering (TBML) case that involved six individuals - Saudi citizens and expats - who colluded to use bank accounts as a facade for illegal money transfers. The group imposed a collective sentence of 31 years for their criminal activities, which cost the Kingdom millions in ill-gotten gains. This revelation comes as the European Union estimates TBML cash laundering activities are worth a staggering 1.8 trillion dollars annually (Source).

TBML in Saudi Arabia and the GCC: A Growing Challenge

As the financial world grapples with increasingly sophisticated money laundering schemes, the focus shifts to Trade-Based Money Laundering (TBML) in the GCC region, where Saudi Arabia and other countries struggle to combat this complex financial crime. The FCN’s Financial Crime Country Dashboard rates Saudi Arabia as a “moderate risk” for financial crime, with TBML being a primary concern for money transfers outside the kingdom. Likewise, the Financial Action Task Force (FATF) gray listed the UAE due to similar challenges ([Source](https://www.fatf-gafi.org/countries/middle-east-and-north-africa/ united-arab-emirates)).

Combatting TBML: A Coordinated Effort

To combat these risks, multiple regulatory authorities in Saudi Arabia collaborate to enforce anti-money laundering (AML) regulations:

  1. Ministry of Anti-Money Laundering
  2. Saudi Arabian Monetary Agency
  3. Capital Markets Authority (CMA)
  4. Saudi Central Bank (SAMA)
  5. Saudi Arabia Financial Intelligence Unit (SAFIU)

These organizations work together to implement regulations, standards, and laws that target money laundering, including TBML, aiming to combat this growing threat (Source).

The Evolution of TBML Schemes

Regardless of the efforts to contain TBML, criminals continue to innovate, adapting their schemes across the GCC region. Six prevalent ways TBML exploits are evolving include ([Source](https://www.kpmg.com/us/en/issuesandinsights/ articlespublications/Pages/trade-based-financial-crime-kpmgtbfc-apac.aspx)):

  1. Use of back-to-back letters of credit
  2. Presentation of fictitious documents
  3. Phantom shipments
  4. Over or under-invoicing
  5. Accounts used as pass-through mechanisms
  6. Employment of shell and front companies

Counteracting the Threat: A Multi-Layered Approach

Effectively combating these advances necessitates a combined, multi-layered strategy using advanced data analytics and technologies like distributed ledger technologies and blockchain. By adopting a comprehensive approach, financial institutions (FIs) can more efficiently and effectively detect and prevent TBML activities (Source).

A Comprehensive Solution to Tackle TBML

Eastnets offers a robust, integrated solution called SafeTrade, aimed at addressing the intricacies of TBML chains. This solution offers a holistic approach to connect the dots across the complex web of elements and entities involved in a trade transaction, while providing an at-a-glance dashboard, monitoring capabilities, and real-time sanction screening (Source).

Conclusion: Combating TBML Demands a Vigilant Approach

The growing trend of Trade-Based Money Laundering in the GCC region calls for continued vigilance, with regional organizations like the MENA Financial Crime Compliance Group emphasizing the complexity of these schemes. TBML poses a significant risk for extracting large sums of money from the GCC if preventative measures are not put in place (Source).

In conclusion, understanding the evolution of TBML schemes and adopting an integrated, multi-layered approach using advanced technologies are essential to mitigating the risks and effectively combatting TBML in Saudi Arabia and the GCC. If you want to learn more about how Eastnets SafeTrade can help your organization combat TBML, contact an expert today.