The role of freight forwarding companies in detecting and investigating trade-based money laundering

Abstract

PURPOSE :

This study aims to investigate the role of freight forwarding companies in detecting and reporting trade-based money laundering. The proximity of freight forwarding companies to shipping-related trade-based money laundering red flags places them in an ideal position to detect suspicious transactions. DESIGN/METHODOLOGY/APPROACH : The study used semi-structured interviews with expert participants in freight forwarding shipping and compliance aspects around freight forwarding. This study focuses on the South African context. FiINDINGS :

Freight forwarding companies are well-positioned to detect, investigate and report on trade-based money laundering schemes. However, the companies are not always aware of the guidelines designed to assist in identifying trade-based money laundering schemes. Thus, freight forwarding companies develop internal processes to identify trade anomalies but are often unable to link trade anomalies to illegal financial flows and trade-based money laundering schemes.

RESEARCH LIMITATIONS/IMPLICATIONS :

The current regulations on money laundering can be extended to freight forwarding companies by the respective regulators for enhanced anti-money laundering protection. This study is limited to freight forwarding companies in a South African context. PRACTICAL IMPLICATIONS :

Increased awareness among staff in freight forwarding companies can assist them in identifying trade-based money laundering red flags to detect and prevent trade-based money laundering schemes. SOCIAL IMPLICATIONS :

This paper assists other role players and policymakers in the trade process to create a better awareness of trade-based money laundering. The limited obligations on freight forwarding companies to comply with anti-money laundering regulations lead to a more volunteer-like compliance practice. ORIGINALITY/VALUE :

To the best of the authors’ knowledge, this is the first paper that offers insight into the role of freight forwarding companies in detecting trade-based money laundering in South Africa.