# TBML by Nerous

> Trade-based laundering survives a review that checks the invoice and the manifest separately. This page sets out what the gap is, the four mechanisms that exploit it, and the twelve checks a review has to run against a single trade.

- Source: TBML by Nerous
- URL: https://tbml.ai/
- Publisher: Nerous
- Contact: hello@nerous.ai

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## What trade-based money laundering is

Value moved across a border by misstating the price, quantity, quality or description of goods in a trade that is otherwise real and documented. Because settlement follows the documents, the transfer completes before anyone looks at the goods.

## The gap: three records, and what each cannot see

A trade misinvoicing scheme does not need to defeat any control. It needs the controls to keep working exactly as designed, each on its own record. Nobody is wrong, and nobody holds the two records whose disagreement is the entire transfer.

### The payment record

- Holds: Amount, currency, value date, ordering and beneficiary institution, remitter and beneficiary names, a reference line.
- Cannot see: Whether anything shipped, what it was, and what it was worth.

### The document set

- Holds: Goods description, HS heading, quantity, unit price, incoterm, load and discharge ports, vessel, consignee.
- Cannot see: Whether the price has a market basis, and whether these documents already supported another payment.

### The comparison

- Holds: The difference between the two, which is the only place the transfer is visible at all.
- Cannot see: Nothing, but no system produces it by default.

## Four mechanisms

Each works by making a single field in the record disagree with the physical trade, and each is caught by comparing documents that different teams normally hold separately.

### Where the value actually moves (mechanism)

Trade misinvoicing settles a real payment against a misstated fact. The bank sees a credit that matches its documents, the customs authority sees a declaration that matches the container's paperwork, and the difference between the two records is the transfer.

Ask: Which single documented fact carries the whole discrepancy: the price, the count, the description, or the party?

Detail: https://tbml.ai/insights/what-is-trade-based-money-laundering.md

### Over- and under-invoicing (price)

The quantity shipped is honest and the price is not. Over-invoicing an export moves value to the exporter; under-invoicing an import leaves it with the importer. Both are ordinary commercial negotiation until the declared unit price stops tracking anything observable.

Ask: Against what did you compare the unit price, and does that comparison hold at this heading, quantity, incoterm, and date?

Detail: https://tbml.ai/insights/over-and-under-invoicing-red-flags.md

### Over- and under-shipment (quantity)

The price survives scrutiny because it is genuine. What differs is the count. Phantom shipments are the limit case: documents in good order for a container that was never loaded, which is why the transport record and the invoice have to be read against each other rather than in sequence.

Ask: Do the packing list, gross weight, container count, and bill of lading agree with the invoice, and if not, which two of them agree with each other?

Detail: https://tbml.ai/insights/over-and-under-shipment-quantity-manipulation.md

### Multiple invoicing (repetition)

One genuine shipment, invoiced more than once, often through different banks so that no single institution sees the repetition. Nothing about any individual payment looks wrong, which is the point: the anomaly exists only across files that are not usually compared.

Ask: Has this transport document reference, container number, or vessel voyage already supported a payment somewhere in the book?

Detail: https://tbml.ai/insights/multiple-invoicing-typology-explained.md

## The 12 checks, and the record each has to reach

A review is only as good as the records it can reach. Half of these cannot be answered from any single system, which is why they are the ones that get skipped. The counterparty and payment checks are mapped to the indicators published in FinCEN Advisory FIN-2010-A001, so a finding can be written up against a named indicator. No single check settles anything on its own, and each is read against the activity expected for that customer.

| Area | Check | Record it has to reach |
| --- | --- | --- |
| Value | Unit price against comparable trades at the same heading, incoterm and quantity band | Invoice against market reference data |
| Quantity | Invoiced quantity against the quantity on the transport document | Invoice against bill of lading |
| Quantity | Manifested gross weight against the invoiced count and unit weight | Packing list against carrier manifest |
| Quantity | Freight charged against the weight and volume actually carried | Carrier invoice |
| Documents | Goods description consistent across invoice, bill of lading, certificate of origin and packing list | The document set, read against itself |
| Documents | Transport document and container references checked for a payment already made against them | The trade book, across products and branches |
| Documents | Bill of lading reissued in transit, or consignee changed after loading | Carrier records and document history |
| Documents | Letter of credit amended without a commercial reason | Amendment history on the credit |
| Parties | Remitter or beneficiary sitting outside the contract | Payment instruction against the contract parties |
| Parties | Counterparty's stated business and prior trades consistent with these goods at this volume | Counterparty file and trade history |
| Movement | Route, vessel capacity and transit time consistent with the declared shipment | Vessel and port records |
| Movement | Goods, value and destination against export controls, sanctions and free-trade-zone exposure | Classification and screening |

## A worked example

Electronic integrated circuits, Singapore to Rotterdam. HS 8542.31, CIF, 2,400 units, $184,200.

- Invoiced quantity: 2,400 units. On the bill of lading: 1,860 units, a shortfall of 540.
- Declared unit price: $76.75. Corridor median for the heading: $55.60, so +38.0%.
- Manifested gross weight: 3,751 kg, which is consistent with 1,860 units at 2.017 kg each, not with 2,400. The transport record corroborates itself and the invoice is the outlier.
- Value at risk: $50,760 above benchmark, on goods partly never loaded.
- A second bill of lading naming a different consignee was issued at Jebel Ali while the first set was still outstanding.
- The remitter is neither the buyer, the seller, nor their agent.

## Questions

### What is trade-based money laundering?

Value moved across a border by misstating the price, quantity, quality or description of goods in a trade that is otherwise real and documented. Because settlement follows the documents, the transfer completes before anyone looks at the goods. FATF has treated it as a distinct typology since 2006.

### Why does transaction monitoring miss it?

Because the payment is the honest part of the scheme. Monitoring looks for anomalies in account behaviour: velocity, structuring, unusual counterparties, high-risk corridors. A misinvoiced trade produces none of them. The payment matches its instruction, its instruction matches the documents, and the discrepancy sits between the documents and the goods, which the payment record never touches.

### Isn't a documentary credit examination already a document check?

It checks the documents against the terms of the credit, not against the commercial reality of the trade. UCP 600 article 5 is explicit that banks deal with documents and not with the goods to which those documents may relate. A conforming presentation can describe a shipment that never happened, at a price with no market basis, and still be conforming.

### How much does a single red flag tell you?

Very little, and a price variance with an ordinary commercial explanation is the common case rather than the exception. What raises a question to a finding is a second record disagreeing with the first: a quantity that will not reconcile, a consignee that changed in transit, a remitter with no role in the contract. One indicator generates an alert. Two that cannot both be true generate a case.

### Does the platform decide anything?

No. It assembles the comparison, states which checks failed, and keeps every figure traceable to the document it came from. The escalation decision stays with the investigator, as does the suspicious activity report, which has to set out in the narrative why the activity is suspected. Writing that is a judgement about a specific customer and a specific trade, and it is not something a score can stand in for.

### What stage is Nerous at?

Early access, working with a small number of trade finance and financial crime teams on live review workflows. The product is being built against cases practitioners bring us rather than against a requirements document, which is why the conversation we ask for is a review that went badly rather than a feature list.

## Elsewhere

- Research index: https://tbml.ai/insights
- Every article as one Markdown file: https://tbml.ai/llms-full.txt
- Site index for models: https://tbml.ai/llms.txt