Under-invoicing in trade-based money laundering serves to do what?

Under-invoicing in trade-based money laundering serves to do what?

• A. Invoicing a price below fair market value to transfer value to the buyer
• B. Invoicing a price above market value
• C. Paying higher taxes
• D. Increasing shipping costs

Answer: (A)

In trade-based money laundering, mispricing of goods on invoices is a common tool to move value across borders. When an invoice is issued for a price below the fair market value, the buyer pays less than the goods are worth, effectively transferring value to the buyer’s country. This creates a flow where illicit or hidden funds can be moved under the cover of legitimate trade—the payment appears as a legitimate purchase, while the true value is not reflected in the cross-border transaction. This is different from inflating invoices or other tactics that would push value in the opposite direction or rely on higher shipping costs or taxes, which aren’t the primary means of transferring value. So, invoicing below market value to the buyer is the mechanism that best describes how under-invoicing moves value across borders.

In trade-based money laundering, mispricing of goods on invoices is a common tool to move value across borders. When an invoice is issued for a price below the fair market value, the buyer pays less than the goods are worth, effectively transferring value to the buyer’s country. This creates a flow where illicit or hidden funds can be moved under the cover of legitimate trade—the payment appears as a legitimate purchase, while the true value is not reflected in the cross-border transaction.

This is different from inflating invoices or other tactics that would push value in the opposite direction or rely on higher shipping costs or taxes, which aren’t the primary means of transferring value. So, invoicing below market value to the buyer is the mechanism that best describes how under-invoicing moves value across borders.