Trade-based money laundering (TBML) presents a significant challenge for financial crime teams, as criminals exploit international trade to disguise the movement of illicit wealth. By manipulating shipment values, falsifying documentation and routing payments through complex networks, offenders can make suspicious transactions appear commercially legitimate. Estimates indicate TBML may account for 87% of global illicit financial flows, while more than 51% of compliance leaders identify it as a major threat to their organisations.
RegTech provider ZIGRAM is addressing these risks through technology designed to bring entity screening, transaction monitoring and due diligence closer together. Traditional controls can struggle to identify sophisticated schemes because banks frequently assess individual trade documents in isolation. An invoice may appear legitimate on its own, for example, while inconsistencies emerge only when it is compared with shipping records, customs declarations and payment activity.
This fragmented approach can leave critical information undiscovered. Trade finance teams assess commercial paperwork, payments departments oversee fund transfers and compliance professionals screen individuals and businesses. Without a connected view of these activities, suspicious relationships between counterparties and transactions may go unnoticed.
Integrating data from multiple sources can help institutions identify these connections. Information from invoices, packing lists, bills of lading and payment messages can be extracted, standardised and cross-referenced to uncover inconsistencies.
Consider a hypothetical electronics exporter declaring shipment values 35–40% above prevailing market prices. The packing list also contains weights that do not match the bill of lading, the buyer is a recently incorporated business with no apparent operations, and payments originate from unrelated third parties. Although each indicator could have a legitimate explanation, their combined presence warrants closer scrutiny.
Effective detection begins with checking whether trade records tell a consistent story. Contract terms, invoice prices, currencies and counterparties should align, while shipment quantities and weights should match across supporting documents. Declared values and Harmonised System (HS) codes should also be consistent with customs records.
Several established laundering techniques exploit weaknesses in these checks. Over-invoicing, under-invoicing and multiple invoicing can be used to transfer value across borders under the appearance of legitimate commerce. The Black Market Peso Exchange, meanwhile, combines trade misinvoicing with currency exchange to facilitate the movement and repatriation of criminal proceeds.
Pricing discrepancies can provide an additional warning signal. FATF–Egmont indicators reference price differences of 15–25% against trade benchmarks as potentially useful indicators for screening. However, investigators must account for legitimate commercial factors, including distressed sales and transfer pricing, before concluding that activity is suspicious.
Additional red flags include generic product descriptions such as “spare parts”, scrap copper valued at prices associated with refined copper cathodes, commercially unusual routes through free trade zones, repeated container identifiers, shell-company intermediaries, split payments and circular flows of funds.
Rather than treating each alert independently, compliance teams should assess how multiple indicators interact. Several inconsistencies across pricing, shipping documentation, ownership and payments can provide a stronger basis for investigation than any single anomaly. Initial checks should eliminate administrative mistakes and unit-conversion errors, followed by comparisons against market benchmarks, corporate registries and other reliable sources. Investigators can then assess whether the transaction has a credible commercial rationale.
Financial institutions must also consider the regulatory frameworks and industry standards governing financial crime prevention. These include the Financial Action Task Force’s 40 Recommendations, the US Bank Secrecy Act, the EU’s Sixth Anti-Money Laundering Directive and the Wolfsberg Group’s Trade Finance Principles. Guidance from HMRC and the US Financial Crimes Enforcement Network (FinCEN) also informs risk-based approaches to monitoring and investigation.
ZIGRAM offers several products within its ecosystem, including PreScreening.io, Entity Hero, Transact Comply and Due Diliger, which are positioned to support connected screening, transaction monitoring and due diligence. Bringing together information on businesses, trade activity and payments can help financial institutions identify relationships that might otherwise remain hidden across separate systems.
The challenge extends beyond trade finance, highlighting the importance of connected data and risk-based controls across the wider compliance function. With the World Bank estimating that $1.5tn is paid in bribes annually, improving the ability to identify suspicious patterns remains a significant priority for financial institutions.
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Copyright © 2026 RegTech Analyst
