Understanding Phantom Shipments in TBML Parlance

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Dr. Apurva Joshi
Dr. Apurva Joshi
Dr. Apurva Joshi is a regular contributor on the subjects of Money Laundering and Compliance. She is a board member of Quick Heal Technology Limited.

In the wake of Trade Based Money Laundering, one term is being commonly used these days and is called Phantom Shipments -The shipments, which exist only on paper.

This is an interesting concept, where the buyers and sellers collude with each other and orchestrate a scheme where fake invoices and other shipping documents travel alone with no merchandise associated with them. 

Imagine you’re buying something online. But instead of getting the actual item, you receive an invoice—a bill for the product. Here’s the twist: the seller never actually sends you the item. Sometimes, the item doesn’t even exist in the first place. Yet, you still end up paying for it.

Now, let’s say you’re in one country, and the seller is in another. This is where things get tricky. You’ve sent money to someone in a different country for goods you never got, and they never really sent. This is a classic example of a phantom shipment.

In simpler terms, it’s like paying for a product you never receive, and the seller gets away with your money because they’re in a different country. It’s a sneaky way some people use to move money around illegally across borders.

Phantom Shipments through eCommerce Platforms

Through the phantom shipments, the goods are moved out of the country and the foreign remittances are received by the exporters. The typical TBML scheme involves collusion on both sides of the import-export transaction and the transfer of value across borders. Financial institutions need to have a sound compliance program. There are many red flags associated with such transactions. Financial Crime Compliance teams of the banks need to identify them.

The rise of online shopping, known as e-commerce, has made it easier for financial crimes like phantom shipments to happen. Here’s how it works:

People who want to sell stuff can put their products up for sale on big websites like Amazon or Alibaba. Often, they don’t need to give much information about themselves, like ID or proof of who they are. They can then sell their stuff at high prices, and buyers who don’t know any better will agree to pay those prices.

Read More about eCommerce Frauds and Money Laundering in Riskpro Publication eCommerce Frauds: Navigating the shadows of online business available on Amazon.

Now, here’s where it gets tricky: the online marketplace, like Amazon or Alibaba, might not realize what’s going on. They might unknowingly play a part in a sneaky money scheme called Trade-Based Money Laundering. This happens when the seller and buyer agree on a price, but behind the scenes, they’re doing something illegal to move money around.

For example, they might say they’re selling something cheap, like scrap material, but in reality, they’re moving millions of dollars around. And the online marketplace might not even realize it’s happening.

Implications of Phantom Shipping

The implications of phantom shipping extend beyond financial fraud and can have far-reaching consequences for global trade and security. For instance, in the context of international trade, phantom shipments can be used to evade tariffs, circumvent trade restrictions, or smuggle illicit goods across borders. By exploiting weaknesses in trade finance and customs enforcement systems, criminals can profit from illegal activities while undermining the integrity of legitimate trade channels.

In certain cases of phantom shipments, where the delivery will never be dispatched, the nature of Amazon transaction would be changed from Fulfilled by Amazon to Self-fulfillment and the goods would never get into the ship to be delivered, however, the payments would be routed through the market places and the seller receives clean money from the remittance of Amazon.

Ghost Shipping is a technique of Trade-Based Money Laundering (TBML). It is a big problem because it’s often connected to other types of rule-breaking. For example, it can involve breaking U.S. laws about controlling exports and sanctions, which are rules about trading with certain countries or people. It’s also linked to the U.S. Foreign Corrupt Practices Act, which is a law against bribing foreign officials. So, when TBML happens, it’s not just about hiding money—it’s often part of a bigger web of illegal activities.

TBML Certification

Indiaforensic offers TBML Certification, which focuses on Trade-Based Money Laundering. This certification helps individuals understand how to detect and prevent sneaky money movements within trade transactions. It also discusses the Ghost Shipments techniques.

Phantom trading is another deceptive TBML Technique, where individuals engage in pretend trading activities without any real exchange occurring. It’s akin to pretending to sell something without actually transferring any goods or money.

The TBML Certification offered by Indiaforensic is a professional course that helps people learn about spotting sneaky money movements in trade. It’s a blended certification, which means students get access to different learning materials like recorded videos, practice exams, and books to study from.

To pass the course and get certified, you need to score at least 75% in your exams. So, it’s like taking a class to become an expert at recognizing tricky money stuff in business transactions.

You may like to check out the Certified Anti Money Laundering Expert Program offered by Indiaforensic.


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