ISLAMABAD: In compliance with the Financial Action Task Force (FATF) guidelines, the government amended the Customs Act 1969 via Finance Bill 2024-25 to provide legal backing to the Directorate General of Trade-Based Money Laundering (TBML).

As per the proposed amendment in the Customs Act, a new section ‘3CCE’ is being added for “Directorate Gen­eral of Trade-Based Money Laundering.”

“TBML shall consist of a director general and as many directors, additional directors, deputy directors, Assistant Directors and such other officers as the board may, by notification in the official gazette, appoint,” said the bill.

FATF identified three main methods by which criminal organisations and terrorist financiers move money to disguise its origins and integrate it into the formal economy.

The first is through the use of the financial system; the second involves the physical movement of money (e.g. through the use of cash couriers); and the third is through the physical movement of goods through the trading system.

In recent years, the Financial Act­ion Task Force has focused considerable attention on the first two of these methods. By comparison, the scope for abuse of the international trade system has received relatively little attention. As per the FATF report, the international trade system is subject to a wide range of risks and vulnerabilities that can be exploited by criminal organisations and terrorist financiers.

In part, these arise from the enormous volume of trade flows, which obscures individual transactions; the complexities associated with the use of multiple foreign exchange transactions and diverse trade financing arrangements; the commingling of legitimate and illicit funds; and the limited resources that most customs agencies have available to detect suspicious trade transactions, it said.

TBML as defined by FATF is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an atte­mpt to legitimise their illicit origins.

The FATF’s study concludes that trade-based money laundering represents an important channel of criminal activity and, given the growth of world trade, an increasingly important money laundering and terrorist financing vulnerability.

Published in Dawn, June 13th, 2024

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