Glossary term
Trade Mis-invoicing
Subject: Financial Crime, Money Laundering, Typologies and Asset Recovery
Also known as: False invoicing in trade, Over- and under-invoicing
Trade mis-invoicing is deliberately stating a false price, quantity or description of goods or services on trade documents, so that value moves across borders in a way that hides its real purpose.
Explanation
If an importer pays more than goods are worth, the extra money reaches the exporter as hidden value. If an exporter bills less than the goods are worth, the buyer abroad collects the difference. Both directions can move funds out of a country, launder proceeds of crime, dodge customs duty or taxes, or get around capital controls. The description may be wrong too, for instance a cheaper product named on paper to pay less duty. It differs from legitimate transfer pricing, where related companies agree prices that may be disputed but are not false by design. Mis-invoicing is among the most common methods inside trade-based laundering. Investigators spot it by comparing declared prices with market benchmarks and matching customs records on each side of a deal. A customs officer or bank analyst who sees only one side of a shipment cannot tell a bargain from a disguised transfer.
Example
A trading company in one country exports garments worth 100,000 but invoices them at 40,000 to a related buyer abroad. The buyer then resells at full value and credits the difference to an offshore account owned by the exporter's owner. Customs data on both sides show different values for the same shipment, and a bank analyst notices the gap during a review.
Not to be confused with
- Transfer Pricing
- Transfer pricing sets prices between related companies and is lawful when at arm's length. Mis-invoicing states prices or goods falsely on purpose.