What happened
On 18 February 2010, FinCEN issued Advisory FIN-2010-A001 to help financial institutions identify and report suspected trade-based money laundering through Suspicious Activity Reports. The advisory set out basic TBML schemes, including over- and under-invoicing of goods and services, and double invoicing of the same goods or services across multiple transactions. It also listed specific red flags for institutions to watch for, including third-party payments made by an intermediary apparently unrelated to the seller or purchaser, letters of credit amended without clear justification, and discrepancies between shipping documents and the invoices submitted for payment.
Why it matters
The advisory remains a foundational reference point because it directly addresses why TBML is so hard to detect at the level of a bank or other financial institution. Institutions typically see only the paperwork associated with a trade transaction — invoices, letters of credit, shipping records — and not the underlying goods. FinCEN noted that these documents may themselves be fabricated by the launderers, with no independent third party available to verify their accuracy. This structural limitation means that document-based red flags, while useful, cannot be treated as conclusive proof of wrongdoing on their own.
FinCEN was explicit on this point: no single indicator, taken in isolation, demonstrates that trade-based money laundering is occurring. Instead, institutions are expected to assess red flags in the context of a customer’s expected transaction activity, comparing what is observed against what would be normal for that customer’s business, trade corridor, and product type. This contextual approach has shaped how compliance teams build TBML detection logic ever since, moving beyond simple flagging toward pattern recognition tied to customer risk profiles.
Context
Advisory FIN-2010-A001 predates much of the automated trade-finance surveillance technology now in use, yet its core framework — invoicing manipulation, document discrepancies, and unrelated third-party payments as warning signs — continues to underpin SAR narratives and red-flag typologies cited by institutions and regulators. Its emphasis on documentary opacity and the absence of neutral verification also anticipated a persistent challenge in trade finance: that compliance functions are frequently working with information supplied by the very parties they are trying to scrutinise, reinforcing the need for corroboration wherever possible.