A recent article in the Wall Street Journal discusses what it describes as an increasingly popular method of money laundering known as “trade-based money laundering,” said to be pioneered by Latin American drug smugglers in the 1990s. The Journal explained the method as follows:
Instead of wiring money directly from one country to another, a would-be money launderer buys foodstuffs like sugar or vegetable oil or other goods. Those goods are far easier to deliver to restricted destinations like Iran and the Palestinian territories because they often look like legitimate aid. When they arrive, local merchants transfer the goods on, or simply sell them for cash. A portion of the proceeds end up with local terrorist groups or criminals. The illicit trades are often blended in with legitimate ones, which makes them difficult to single out and the source of their funding hard to trace. Authorities say the scope and prevalence of the practice is tough to determine with any precision, but it is clearly on the rise.
The report states that trade-based money is laundering widespread in the Persian Gulf region and that funds are often then laundered in Dubai citing the financing of the Afghan-Iran heroin trade for example.
The report goes on to discuss the connection of trade-based money laundering and terrorism in connection with the Comite de Bienfaisance et de Secours aux Palestiniens (CBSP), a member of the Union of Good, a global network of charities directed by Muslim Brotherhood leader Youssef Qaradawi:
One such case recently surfaced in Europe when French authorities discovered that a Paris-based charity the U.S. officially designates as a sponsor of terrorism has been buying large lots of commodities for delivery to the Palestinian territories. While much of the goods constitute legitimate aid, a portion of the shipments ultimately ends up with terror groups, officials allege. Funds for the original goods purchases by money launderers increasingly come from Iran, Israeli officials say. Some of the funds and goods allegedly end up with Palestinian Islamic Jihad and Hamas. Both groups are seeking to disrupt the Palestinian peace process with Israel and often sponsor terrorist attacks. For at least two years, Israeli and European counterterrorism officials allege, supporters of the Palestinian groups have been using donations raised in Europe to purchase sugar and other commodities…In the Palestinian territories, French and Israeli police are scrutinizing several commodities transactions involving goods either paid for or purchased on behalf of the Comite de Bienfaisance et de Secours aux Palestiniens, or the Committee for Palestinian Welfare and Aid.
Accusations of such trade-based money laundering were also discussed at least ten years ago in connection with the activities of companies controlled by Ahmed Nasreddin, an Ethiopian businessman and former Italian resident who is associated with Muslim Brotherhood leaders Youssef Nada and Ghaleb Ali HImmat. Non-public reports said to be the product of Italian intelligence agencies discuss suspicious movements of commodities into Bosnia and other conflict areas by companies controlled by Nasreddin that were described as having “no commercial logic” or were thought to be associated the financing of illegal activities. Nasreddin and Nada were recently acquitted by an Italian court in connections with terrorism charges.
(note: Article available on paid basis. Also available from Associated Press Financial Wire “Trade becomes route for money tied to terrorism” July 2, 2007 Monday 3:23 PM GMT)