A white paper released Sept. 4 by Sen. Bill Cassidy, R-La., raises concern with the ability of the federal government to combat trade-based money laundering (TBML) and suggests that a public distributed ledger system could be used to prevent such money laundering.
“There needs to be real-time coordination and reviewable connections between the agency handling the manifest information and the agency handling corresponding financial information within the U.S. and between the U.S. and our trading partners,” the white paper states. “This could be accomplished through a public distributed ledger system. This system would allow all parties to simultaneously follow the transaction and track any changes made to the documents uploaded to the system.”
Identifying TBML is not part of the U.S. cargo inspection process, which mainly relies on information provided by party manifests, the white paper states.
Further, there’s no requirement for manifest information and invoice information to match, resulting in a lack of real-time data tracking necessary to combat TBML, the paper says.
“So, if exported goods move from the U.S. to Country 1, but the invoice is routed through Country 2 and the reported value on the invoice is lowered in Country 2 without the knowledge of parties in the U.S. or Country 1, Country 1 will collect fewer duties upon the imported good,” the paper says.
Such money laundering also can decrease tax revenue collected due to the sale of underpriced goods to consumers, putting legitimate businesses at a competitive disadvantage, and can spur the infiltration of counterfeits in supply chains, the paper notes.
In the paper, Cassidy calls for a legislative agenda to counter TBML and disrupt drug trafficking; development of an appropriate U.S. methodology and system to integrate necessary trade and intelligence data; prioritization by federal agencies in combating TBML through interagency and private-sector cooperation; and enhanced collaboration with trading partners to stop TBML.
Further, government agencies should partner with private-sector companies starting to deploy distributed ledger systems, the paper says.
Congress should task appropriate federal agencies with tracking and correlating shipping manifest and financial information from the public and private sectors in real time, using a public distributed ledger to accomplish this, according to the paper.
“Threat networks, terror groups and drug traffickers are often linked through social relationships and common facilitators, which means that despite different objectives, they share the same assets for shipping illicit goods, funneling money and bribing officials,” the paper says. “Those assets form part of a supply chain in which licit trade takes place. This makes TBML one of the most profitable and safe mechanisms to launder money, and it is imperative that Congress act.”
