Cleaning up international trade

Growing criminal exploitation of global trade means compliance professionals must adopt integrated, intelligence-led strategies, says Mayya Konovalova.

The ongoing and indeed increasing exploitation of international trade by transnational criminal networks represents a profound challenge. Through interconnected and ‘nested’ criminal activities, criminals the world over are proving adept at trade-based money laundering (TBML), counterfeiting, smuggling and tax evasion, often in response to gaps in enforcement. The means of closing those gaps, and of preventing such activity, lies in identifying how criminals operate.

Research carried out as part of the Serious Organised Crime Anti-Corruption Evidence (SOC ACE) programme has furnished useful and practical insight on how they do so. What follows draws on interviews conducted with 52 experts across law enforcement, customs, academia and industry as part of the SOC ACE programme. While focused on UK-based organisations, international perspectives were included to reflect the global nature of trade and its associated risks.

The nesting of crime types: Beyond silos

‘Trade-based money laundering sits in the context of other forms of crime. It’s rarely possible to isolate trade and see it on its own.’ Interview 24

Interviewees consistently emphasised that trade-related crimes rarely occur in isolation. In one example, counterfeit goods sold in stores in Camden, London were not only infringing intellectual property rights but were also being used to launder money, evade taxes and exploit illegal labour. These shops, some paying up to £5,000 a week in rent, often operated bureau de change facilities, enabling illicit financial flows. In one raid, law enforcement found illegal immigrants concealed in buildings used for counterfeit manufacturing.

Another case highlighted involved the illicit cigarette trade in Latin America, where organised criminal groups used tobacco smuggling to fund broader criminal operations, including slave labour, tax evasion and terrorist financing. The counterfeit goods sold in London and the illegal cigarette trade in Latin America both demonstrate how one crime often enables another. Compliance professionals must be alert to these overlaps, as siloed approaches are liable to miss the broader criminal architecture.

The question of where one's responsibility ends reflects a growing tension in compliance and governance.

Counterfeiting: The gateway crime

‘Counterfeiting funds organised crime… It’s used to launder money and push it through to different countries.’ Interview 4

Counterfeiting emerged as a low-risk, high-reward activity that generates substantial profits and facilitates other forms of organised crime. Interviewees described how counterfeit operations often share infrastructure with drug trafficking and money laundering networks. One expert explained how former drug traffickers in the UK repurposed their supply chains to import counterfeit goods, attracted by the lower legal risks.

Shops selling counterfeit goods in central London also operated illicit bureau de change facilities were cited, enabling unregulated cross-border financial flows. The presence of slave labour and tax evasion in these operations illustrates the layered criminality behind seemingly minor IP infringements. Counterfeiting is often deprioritised and mistakenly considered a less serious criminal activity, creating compliance blind spots.

TBML: A hidden tool in a broader criminal ecosystem

‘The enablers that facilitate sanctions evasion are the same ones that facilitate money laundering.’ Interview 26

TBML is one of the most complex and adaptive forms of financial crime. It is rarely a standalone offence, rather a tactic embedded within broader laundering operations. Law enforcement officials emphasised that international trade is routinely exploited for the movement of illicit commodities. Drugs, for example, are often concealed in legitimate shipments, such as cocaine hidden in banana containers or gold smuggled under scrap metal.

TBML is used to balance trade flows and is often combined with informal value transfer systems such as hawala or Chinese underground banking. These systems are used globally to move large volumes of cash generated by serious and organised crime. International controller networks, including those operating out of Dubai, use TBML alongside other tools, such as physical cash transport, crypto exchanges and bank transfers to obscure the origin and destination of illicit funds (Interview 38). TBML is notoriously difficult to detect and often relies on proxy indicators.

TBML also overlaps with sanctions evasion, corruption and fraud. It shares common enablers such as shell companies, mis-invoicing, document falsification and, with growing frequency, cryptoassets. Offshore financial centres and free trade zones (FTZs) are exploited to facilitate TBML, even in jurisdictions with minimal export activity. In some cases, entire trade transactions are fabricated to move money without any actual goods changing hands. Freight forwarders, customs brokers and shell companies are all often used to circumvent sanctions and launder money.

For compliance professionals, such findings reinforce the need to treat TBML as part of a wider criminal ecosystem. Rather than searching for TBML in isolation, risk teams should consider how it interacts with other laundering methods and trade anomalies. This supports the case for integrated compliance strategies that combine financial intelligence, trade data analysis and cross-sector collaboration.

Given the complexity and interdependence of crime risks in international trade, compliance professionals must move beyond siloed approaches and adopt integrated, intelligence-led strategies.

Tax evasion and smuggling: Hidden in plain sight

‘You can export six times more potatoes than you even produce.’ Interview 40

Tax crimes are deeply embedded in trade flows, often concealed behind legitimate-looking transactions. Interviewees highlighted how VAT fraud, excise duty evasion and misclassification of goods are used to avoid tax liabilities and facilitate broader criminal activity. One example involved counterfeiters that selectively VAT-registered, paying VAT on some items while evading it on others. False labelling and under-invoicing were used to exploit lower tariff rates.

Trade anomalies may signal deeper criminal schemes. The overpricing of goods like seeds or potatoes was used to mask illicit financial flows, suggesting that smuggling and TBML often travel the same routes. The scrutiny of trade data and supply chain documentation is therefore essential for compliance professionals.

Fragmented focus and accountability gaps

A persistent challenge in addressing trade crime risks is the fragmented focus across stakeholder groups. Customs authorities may prioritise revenue protection, while law enforcement agencies focus on drugs or arms. Corporate actors, particularly in complex supply chains, may claim limited responsibility if they lack operational control over subcontractors or logistics providers.

The question of where one’s responsibility ends reflects a growing tension in compliance and governance . As sustainability and due diligence regulations evolve – particularly under frameworks like the EU Corporate Sustainability Due Diligence Directive (CSDDD) – companies are now expected to take responsibility for what happens across their supply chains, even when they own only a small stake or operate through intermediaries.

Illicit commodities such as cocaine or gold are routinely moved through legitimate trade channels. These ‘hidden in plain sight’ methods exploit the scale and complexity of global trade. The lack of clarity around enforcement responsibility, especially for dual-classified goods, compounds the challenge. For example, steroids may be classified as both medicines and controlled substances, leading to confusion between agencies like the police and the Medicines and Healthcare products Regulatory Agency (Interview 15).

Interviewees also noted inconsistent information sharing between customs authorities and terminology differences that complicate risk perception. The shifting burden of enforcement from public to private actors was also highlighted. As one put it, ‘you can’t arrest your way out of a problem’, and increasingly, the expectation is that the private sector must regulate, audit and mitigate risks (Interviews 20 and 42).

Toward integrated compliance responses

Given the complexity and interdependence of crime risks in international trade, compliance professionals must move beyond siloed approaches and adopt integrated, intelligence-led strategies . Interviewees highlighted several areas where such integration is both necessary and increasingly feasible.

First, mapping interdependencies between crime types, such as how counterfeiting facilitates money laundering or how TBML overlaps with sanctions evasion, enables compliance teams to design controls that address multiple risks simultaneously. This requires not only technical expertise but also a shift in mindset: viewing trade crimes as part of a broader criminal ecosystem.

Second, cross-sector collaboration is essential. Customs authorities, financial institutions, logistics providers and corporate compliance teams must share intelligence and align risk indicators. While initiatives like the World Customs Organization’s regional intelligence offices and the Organisation of Economic Co-operation and Development’s FTZ certification scheme offer promising models, uptake remains patchy.

Third, data analytics and anomaly detection are vital. Techniques such as reconciling export/import data, identifying country-of-origin anomalies and tracking unusual trade routes can uncover hidden patterns of smuggling and mis-invoicing. Their effectiveness, however, depends on access to reliable data and the capacity to interpret it across jurisdictions.

Finally, compliance professionals can advocate for better resourcing and clearer typologies in under-prioritised areas. As one interviewee noted, counterfeiting may score high on threat and harm matrices yet receive minimal enforcement attention.

Integrated responses build resilience. In a global trade environment where criminal actors adapt quickly and exploit regulatory gaps, compliance must be equally agile, collaborative and informed.

In a global trade environment where criminal actors adapt quickly and exploit regulatory gaps, compliance must be equally agile, collaborative and informed.

Why this matters

For ICA members and compliance practitioners, understanding the nesting of crime risks in international trade is essential for effective risk management and regulatory compliance. Trade-related crimes such as TBML, counterfeiting, smuggling, and tax evasion are deeply interconnected, often sharing infrastructure, enablers and personnel across jurisdictions and sectors.

Traditional siloed approaches, where financial crime, customs violations, and corporate misconduct are treated separately, are becoming inadequate. Instead, integrated compliance strategies are needed to address the shared threat landscape through coordinated controls, intelligence sharing and cross-sector collaboration.

Evolving regulatory frameworks such as the CSDDD and enhanced Global Reporting Initiative standards are pushing companies to take greater responsibility for their supply chains. This includes not only environmental and human rights risks but also the criminal exploitation of trade channels. Compliance teams must now ask, where does our responsibility end? The answer they are likely to receive today is, it doesn’t.

ICA members are encouraged to engage with this evolving landscape, share insights and help shape future compliance strategies that reflect the complexity of international trade crime. We welcome dialogue with practitioners who are navigating these challenges in real time. Your insights can help shape future policy, enforcement strategies and industry standards.

Note. This article draws on research supported by the Serious Organised Crime Anti-Corruption Evidence (SOC ACE) Programme, funded by the UK Foreign, Commonwealth & Development Office (FCDO). The project is registered under SOC ACE Code 2023/UOB/002/Silk Road.