Transfer Pricing-Based Money Laundering in Barter Trade

Dexiang Mei, Xiaojun Li

School of Economics and Management, Southwest Jiaotong University, Chengdu, China.

DOI: 10.4236/me.2015.66071                

Abstract

Barter trade attracts money launderers by its flexible contract, payment term of reciprocal letters of credit, and convenient capital flight and tax evasion. As far as fair value and invoiced value of the transacted goods are concerned, transfer price-based money laundering in barter trade is done by the means of deflated import-inflated export, inflated import-deflated export, deflated import-deflated export, and inflated import-inflated export, where the money laundered can be measured by capital flight, income tax evasion, import duty evasion, and VAT refund evasion in each case. So we should reinforce transaction supervision, promote intelligence exchange, perfect relative regulations, and improve anti-money laundering awareness and capabilities.

Keywords

Barter Trade, Transfer Pricing, Money Laundering, Anti-Money Laundering

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Simser, J. (2013) Money Laundering: Emerging Threats and Trends. Journal of Money Laundering Control, 16, 41-54. http://dx.doi.org/10.1108/13685201311286841
[2]	Gao, Z. (2007) The Dialysis Suspicious Money Laundering Activities in International Trade. Financial Science, 3, 112-117．
[3]	Rodriguez, J.R. (2014) Identifying the Red Flags of Trade-Based Money Laundering in Order to Mitigate Risk. UMI Dissertations Publishing, 1571584.
[4]	Gao, Z. (2009) Transfer Pricing, Money Laundering and Capital Flight: A Perspective of Their Interrelations. Economist, 11, 79-84.
[5]	Lucas, B. (2014) Transfer pricing and the WTO. Journal of World Trade, 48, 59-80.
[6]	Pak, S.J., Zanakis, S.H. and Zdanowicz, J.S. (2003) Detecting Abnormal Pricing in International Trade: The Greece-U.S. Case. Interfaces, 33, 54-65. http://dx.doi.org/10.1287/inte.33.2.54.14473
[7]	Oliver, P. and Mpinganjira, M. (2011) Barter Trading: An Empirical Investigation of Management Practices. African Journal of Business Management, 5, 12256-12263.
[8]	Tao, H. (2007) Speeding up the Development of Modern Barter Trade in China. Journal of Beijing Technology and Business University (Social Science), 22, 1-5.
[9]	FATF/OECD (2006) Trade Based Money Laundering. http://www.fatf-gafi.org/topics/methodsandtrends/documents/trade-basedmoneylaundering.html
[10]	Harvey, J. (2004) Compliance and Reporting Issues Arising for Financial Institutions from Money Laundering Regulations: A Preliminary Cost Benefit Study. Journal of Money Laundering Control, 7, 333-346. http://dx.doi.org/10.1108/13685200410810047
[11]	Gao, Z. (2008) Analysis of Money Laundering Credit-Based in International Trade. Economist, 2, 102-107.
[12]	Zdanowicz, J. (2009) Trade-Based Money Laundering and Terrorist Financing. Review of Law & Economics, 5, 855-878. http://dx.doi.org/10.2202/1555-5879.1419
[13]	De Boyrie, M.E., Nelson, J.A. and Pak, S.J. (2007) Capital Movement through Trade Misinvoicing: The Case of Africa. Journal of Financial Crime, 14, 474-489. http://dx.doi.org/10.1108/13590790710828181
[14]	Kumar, B.V. (2003) The Prevention of Money Laundering in India. Journal of Money Laundering Control, 7, 158-169. http://dx.doi.org/10.1108/13685200410809878
[15]	Lindberg, D.L. (2002) The Use of Barter Hampers Implementation of International Accounting Standards and Contributes to Financial Woes in the Russian Federation. Russian and East European Finance and Trade, 38, 5-17.
[16]	Schlenther, B. (2014) Is the South African Effort toward Reducing Money Laundering Optimal? Journal of Money Laundering Control, 17, 17-33. http://dx.doi.org/10.1108/JMLC-07-2013-0025
[17]	Gao, Z.-A. and Weng, L.-F. (2006) Transfer Price-Based Money Laundering in International Trade. Proceedings of 2006 13th International Conference on Management Science and Engineering, Lille, 5-7 October 2006, 1128-1132.
[18]	Gao, Z. (2008) Transfer Price-Based Money Laundering: A Transit Trader’s Perspective. Proceedings of 2008 International Conference on Wireless Communications, Networking and Mobile Computing, Dalian, 12-14 October 2008, 1-5. http://dx.doi.org/10.1109/wicom.2008.2395
[19]	FATF/OECD. Best Practices Paper on Trade Based Money Laundering. http://www.fatf-gafi.org/documents/documents/bestpracticesontradebasedmoneylaundering.html