TBML Enablers: Under‑Regulated Brokers and Freight Forwarders in the Crosshairs

tbml freight forwarders brokers under-regulated

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An exclusive article by Fred Kahn

Trade-based money laundering (TBML) thrives in environments where oversight is fragmented and third parties play vital roles without adequate regulation. Freight forwarders and customs brokers, both essential for international commerce, are increasingly recognized as pivotal enablers—wittingly or otherwise—of complex TBML networks. Their position at the intersection of goods movement, documentation, and customs procedures makes them valuable to legitimate businesses, but also vulnerable to exploitation by financial crime actors. The lack of direct anti-money laundering (AML) requirements in many jurisdictions leaves significant gaps in global TBML risk management.

While most attention in AML has focused on banks and payment processors, non-financial intermediaries such as freight forwarders and brokers operate with less scrutiny, often serving as the linchpin in illicit trade value transfers. Understanding how their roles, practices, and vulnerabilities can facilitate TBML is critical for compliance professionals, regulators, and trade counterparties worldwide.

How freight forwarders and brokers enable trade-based money laundering

Freight forwarders and customs brokers orchestrate the complex logistics of international trade. They prepare and process key documents—commercial invoices, bills of lading, packing lists, certificates of origin, and customs declarations—that serve as the backbone of legitimate cross-border shipments. Criminals exploit these very touchpoints by falsifying documents, misdeclaring goods, over- or under-invoicing, and obscuring shipment routes. This makes it possible to shift value illicitly without triggering the financial sector’s transaction monitoring systems.

Several key TBML typologies rely directly on the involvement of freight forwarders and brokers:

Phantom shipments: Forwarders arrange transport for goods that never exist, submitting fabricated paperwork to justify fictitious cross-border transactions.
Misclassification of goods: Brokers help process declarations that misstate the type, value, or quantity of goods, enabling under- or over-invoicing schemes.
Multiple invoicing: The same shipment is covered by multiple sets of documents and invoices, allowing repeated payments or movement of extra value across borders.
Layered routing: Complex transport routes involving several jurisdictions obscure the true origin and destination of goods, frustrating law enforcement and compliance reviews.

Even where freight forwarders and brokers are unaware of their role in a larger laundering scheme, their lack of AML training or risk controls makes them susceptible to abuse. These actors often operate in high-pressure, high-volume environments where document discrepancies are easily overlooked, especially if clients are long-standing or shipments appear routine.

Under-regulation: a persistent vulnerability in TBML frameworks

One of the defining features of TBML is the ability of criminal networks to exploit regulatory blind spots. Freight forwarders and customs brokers typically fall outside the AML regulatory perimeter in many countries. The Financial Action Task Force (FATF) has repeatedly flagged this as a vulnerability in its guidance on TBML and recommended a more inclusive approach to AML obligations in the trade ecosystem.

In the European Union, customs brokers are subject to some degree of regulation, but most freight forwarders are not classified as obliged entities under the EU’s AML Directives. In the United States, while there are specific requirements for customs brokers enforced by U.S. Customs and Border Protection, freight forwarders remain largely outside the Bank Secrecy Act’s AML requirements unless they also offer financial services. Other major trading jurisdictions, including Asia and the Middle East, often have fragmented or undeveloped rules for trade intermediaries.

This inconsistent approach leads to:

Lack of due diligence: Many intermediaries perform only basic client checks and rarely verify beneficial ownership, exposing them to being used by shell companies or opaque trade networks.
Minimal transaction monitoring: Forwarders and brokers do not typically monitor for suspicious patterns such as repeated high-value shipments to risk jurisdictions, duplicate documentation, or goods inconsistent with declared value.
Low awareness of red flags: Without training or legal requirements, staff may not recognize classic TBML indicators such as unusual routing, implausible trade terms, or frequent amendments to bills of lading.

As a result, TBML networks deliberately target these intermediaries, knowing that oversight is weak and reporting obligations are absent or poorly understood.

Legal and regulatory responses: closing the TBML gap

Recent years have seen increased calls to extend AML responsibilities to non-financial actors, particularly those with control over trade flows and documentation. FATF’s 2020 “Trade-Based Money Laundering: Trends and Developments” report strongly advocates for the inclusion of forwarders and brokers in national AML regimes, emphasizing the importance of training, recordkeeping, and suspicious activity reporting. Similarly, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) issued joint compliance notes in 2023 that highlight the exposure of the maritime and freight sectors to both sanctions evasion and TBML, recommending risk-based due diligence and information-sharing.

Other countries have taken initial steps to address these risks:

Singapore now requires forwarders handling dual-use or sensitive goods to register and implement basic compliance checks.
Australia has expanded the coverage of its AML/CTF Act to certain categories of trade facilitators.
Netherlands banking guidance encourages extending customer due diligence to the trade chain, focusing on high-risk flows.

Despite these efforts, most global trade continues to rely on actors with little or no AML training, with technology adoption lagging behind that of the financial sector.

Strengthening defenses: practical AML strategies for intermediaries

Freight forwarders and customs brokers can play an active role in disrupting TBML networks by adopting targeted compliance practices, even where not legally mandated. Key strategies include:

Know Your Customer (KYC) protocols: Collect full corporate and beneficial ownership information on all clients, including verifying the legitimacy of the trading business, its directors, and financial flows.
Document validation: Systematically cross-check invoices, shipping documents, and customs declarations for inconsistencies, implausible pricing, and duplicate use.
Risk-based screening: Implement red flag checklists for high-risk countries, commodity types, or unusual trade routes, drawing on FATF typologies and local enforcement advisories.
Staff training: Regularly educate employees to spot TBML warning signs, emphasizing escalation protocols for suspicious activities.
Collaboration and reporting: Where possible, participate in public-private information-sharing forums and report unusual trade practices to national authorities or financial intelligence units.

Digital transformation can further enhance defenses. Electronic bills of lading, blockchain-based trade documentation, and secure data exchange platforms allow for easier cross-verification and audit trails, making it harder for criminals to hide value transfers.

Conclusion: intermediaries at the frontline of TBML risk and resilience

Freight forwarders and customs brokers have become crucial yet under-appreciated nodes in global TBML networks. Their access to trade flows, authority over documentation, and frequent regulatory blind spots make them natural targets for money launderers seeking to move illicit value across borders. Without robust due diligence, training, and oversight, these intermediaries may unknowingly become conduits for vast sums of criminal proceeds.

However, with rising regulatory pressure, technological innovation, and growing awareness of trade-based financial crime, freight forwarders and brokers can move from passive enablers to active participants in AML defense. Proactive compliance, even ahead of legal mandates, not only reduces risk but positions these businesses as trustworthy partners in global trade. The future of TBML risk mitigation will be shaped as much by these third parties as by banks, regulators, and law enforcement.

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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