Tradebased

Tradebased is a term used to describe the study and practice of movements of value and goods in international trade, encompassing legitimate trade financing as well as practices that may hide illicit flows. In regulation and compliance contexts, it is closely associated with trade-based money laundering (TBML) and the misuse of trade channels to launder proceeds or conceal sources of funds.

In practice, tradebased activities may involve mispricing of invoices, false or redundant invoicing, fictitious shipments, misclassification of goods, over- or under-shipment, and the use of shell or front companies. When used to launder money, these techniques aim to disguise the origin, nature, and destination of funds by exploiting the complexity and opacity of international trade.

Regulatory frameworks address tradebased risk through anti-money laundering and counter-terrorism financing measures, including know-your-customer due diligence, beneficial ownership transparency, and trade finance risk assessment. Financial institutions and regulators rely on data from customs, banks, freight forwarders, and insurers, along with analytics, to identify unusual or inconsistent patterns.

Despite its focus on illegitimate use, trade is a legitimate conduit for cross-border commerce. The field emphasizes risk management, compliance, and investigative techniques to distinguish normal commercial activity from potential TBML schemes, and to strengthen supervision of trade finance and supply chains.