Trade-Based Sanctions Evasion

Trade offers cover for evasion because documents are numerous, goods are physical and many parties are involved. Methods include misdescribing goods, so restricted items look harmless, and falsifying the country of origin or the final destination. Invoices may show prices far above or below market value, hiding the transfer of value. Shipments may be routed through third countries and renamed, or sent to a front company that passes them on. Payment may come from an unrelated party, or be settled through netting, so no direct payment trail links the buyer and seller. The activity is related to trade-based money laundering but has a different aim. Banks look at documents, prices, routes and the logic of the deal, and compare them with customer records and shipping data. Staff trained in trade finance are often the first to see a mismatch. A bank can finance a banned shipment without ever seeing a listed name.

An import letter of credit for 5,000 electronic components, priced at triple the market rate, reaches a bank’s review desk. The goods are described in general terms, shipped to a port in a transit hub, and the invoice is payable to a third company in another country. The bank holds the credit, requests the full documents, and refers the file to the sanctions team.