From our offices in the Detroit area, Akeel & Valentine, PLC serves clients nationwide.

From our offices in the Detroit area, Akeel & Valentine, PLC serves clients nationwide.

Whistleblowers and trade-based money laundering

On Behalf of | Dec 12, 2022 | Whistleblower

Money laundering is the process of disguising illegally obtained financial assets as legitimately obtained financial assets. This allows those engaged in criminal activity to avoid detection while reaping the monetary reward.

Not only is money laundering unethical and illegal, it often enables criminals to continue to fund activities that harm society, including drug and arms dealing, terrorism and human trafficking.

The money-laundering process

Money launderers use a variety of schemes to transform criminal proceeds into legitimate-seeming assets. The three basic steps are:

  1. Placement: introducing criminal proceeds into the financial system in a misleading way
  2. Layering: wiring, transferring or otherwise moving funds to create confusion about their origin
  3. Integration: reclaiming funds that now seem legitimate

A rise in trade-based money laundering

Traditionally, anti-money laundering efforts have focused on activities that occur through cash transfers or through the financial system. However, the U.S. Government Accountability Office notes that greater compliance with banking and anti-money laundering regulations has coincided with a greater number of cases of trade-based money laundering.

The role of whistleblowers in identifying trade-based laundering

Trade-based laundering uses commercial transactions to obscure the movement of criminal proceeds. Examples include under- or over-shipping goods or services, multiple invoicing and providing false descriptions of goods or services.

Banks usually have limited information about these types of transactions, making it difficult to detect fraudulent activity. However, whistleblowers are in a unique position to discover and disclose such information.

However, it is important that whistleblowers protect themselves from potential retaliation before disclosure. Individuals should know that several whistleblower laws may apply to money-laundering cases, including the Anti-Money Laundering Act of 2020, the Sarbanes-Oxley Act and the Taxpayer First Act.