Ghost Shipping

Ghost Shipping in AML: Key Highlights

Ghost shipping involves hiding illicit funds by falsifying shipments and trade documents.
Common falsified documents are Bills of Lading, Invoices and Cargo Manifests.
Automated screening, document verification, and maritime data checks help detect red flags.
Effective controls help in reducing trade-based money laundering (TBML) risks.

What Is Ghost Shipping? (Definition & How the Scheme Works)

Ghost shipping, which can also be defined as phantom shipping, is a deceptive trade practice where no actual goods are dispatched or sold, just a fictitious shipment which exists only on paper.

When everything is just on paper, it is easy for perpetrators to create an illusion of trade. Where the success of ghost shipping lies in the credibility of documents and not in the presence of cargo, criminals often use counterfeit documents to legitimise financial flows.

Ghost shipping is the cornerstone tactic in trade-based money laundering, allowing criminals to transfer a lump-sum amount of money across borders, which appears legitimate. Also, it is used for sanction evasion as falsified documents can easily hide the real destination, which enables sanctioned entities to receive them secretly.

Key AML/CFT Risks Associated with Ghost Shipping

Invisible cargos create visible risk; ghost shipping is one of the biggest blind spots in AML/CFT risk.

Convicts using falsified shipping documents such as Bills of Lading (forged to show that goods were sold even when no trade occurred), Invoices (generating the invoice for the non-existent goods, which validates the money transfer) and Manipulated Manifests (falsifying cargo lists by hiding real items and adding non-existent goods).
Ghost shipping enables over-/under-invoicing, where launderers declare a false value for goods by pricing them higher or lower, enabling them to legally shift the funds across borders under the guise of trade.
Along with the shell companies, high-risk corridors and weakly regulated ports are often the mediators to hide the true identity of the person behind the transactions, which facilitates sanctions evasion, proliferation financing, and tax fraud.

Red Flags & Detection Challenges in Ghost Shipping Schemes

Common red flags in ghost shipping include:

A mismatch between documents, cargo type, and shipping routes is a major red flag when the paperwork does not verify the claimed shipment.
When the transaction occurs frequently, with no physical inspection.
Unusual trade volumes or transactions, including counterparties which have no verifiable operations.

Some of the factors which make ghost shipping hard to detect:

Inconsistent vessel tracking occurs when the reported location or shipment movement doesn’t match the actual path.
Preparators often manipulate the Automatic Identification System signals by tampering with the data; they can show the cargo is moving, even when it is not.
The ports usually record the activities when the cargo is loaded or unloaded, but in some cases, it happens only on paper with no real port activity, which creates a gap and makes the detection difficult.

How RapidAML Software Helps Detect Ghost Shipping Risks

When compliance gaps arise, RapidAML ensures protection from risk, with the following factors:

RapidAML provides the automated screening of counterparties against sanctions, PEPs, and adverse media.
With the help of advanced risk scoring, RapidAML evaluate trade patterns and historical behaviour of counterparties, which emphasises the unusual transactions.
RapidAML can integrate with maritime data sources (when available) to verify the routes and ownership, ensuring the legitimate trade.
RapidAML ensures transaction monitoring to detect unusual trade flows and potential manipulation in real-time.
It also spawns alerts for suspicious actors who are involved in trade-based money laundering or maritime fraud, helping the organisation to take the required actions instantly.

FAQs: AML & Compliance Questions About Ghost Shipping

1. How is ghost shipping identified in trade-based money laundering?

Ghost shipping TBML is identified by comparing documents, vessel movements and port activity, which helps in confirming whether the shipment happened or not.

2. Which documents are most commonly falsified?

The documents that were majorly falsified for the purpose of ghost shipping are the Bill of Lading, invoices, and cargo manifests.

3. What data sources help confirm cargo movement?

Data sources that help confirm cargo movement are the automatic identification system (AIS), vessel tracking, and port activities.

4. How do sanctions regulators view maritime documentation fraud?

Sanction regulators see it as a serious misconduct used for money laundering, leading to penalties, serious actions and asset freezes.

5. Can automation reduce manual document reviews for import/export firms?

Yes, automation can screen documents with speed and detect suspicious ghost shipping patterns, which saves time and reduces manual intervention.

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Related Terms

Trade-Based Transaction Manipulation

Trade-Based Transaction Manipulation (TBTM), also referred to as trade manipulation, fraudulent trade structuring or illicit trade value distortion, is the intentional alteration of goods, values and shipment terms in international trade to illegally transfer value.

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Offshore Transfers

Offshore transfers mean moving funds from one account to another account in a foreign jurisdiction. The funds are mostly transferred to countries with strict banking secrecy laws and lighter regulatory oversight

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