Leveraging CTPAT’s Anti-Trade-Based Money Laundering Potential

Special Edition with Guest Student Authors from the Schar School of Policy and Government at George Mason University (https://traccc.gmu.edu/)

I have been honored to be an Adjunct Professor at GMU’s TraCCC (The Terrorism, Transnational Crime and Corruption Center) for several years. Many AML/Sanctions experts have joined me as guest lecturers as we work with graduate students either in or contemplating a career in our community. This past summer, in my International Money Laundering, Corruption, and Terrorism class, the challenge was to educate and stay current with the plethora of changes occurring in the US and internationally.

The students were required to submit a final paper on a topic related to the vast areas covered in class, and I have selected several papers that I know will be of interest to many.

John Byrne

Chair, AML RightSource Advisory Board

Background

Trade-based money laundering (TBML) involves the movement and concealment of illicit proceeds through trade transactions. TBML encompasses the misrepresentation of the quantity, type, and price of goods and services provided to discreetly move money through the financial system, as well as the use of the goods themselves as a means to store, transfer, and conceal illicit capital (FATF, FATF TBML, 3–20). TBML is a pervasive threat to anti-money laundering (AML) and counter-terrorist financing (CTF) efforts. As governments and financial institutions take steps to combat traditional money laundering (ML), criminal actors are increasingly shifting to TBML, which is more difficult for law enforcement to detect. TBML is likely the largest form of money laundering by dollar value (Gianopoulos, U.S. Government TBML, 19). Global Financial Integrity estimates that, on average, criminals launder approximately $87 billion through trade annually, although the actual amount could be significantly higher (Global Financial Integrity, Illicit Flows in Developing Countries, 2, 14–15. TBML provides resources to fuel various crimes that threaten peace, safety, the environment, and sustainable economic development (Global Financial Integrity et al., TBML: A Global Challenge, 2). Thus, governments, civil society, and private sector firms must act to prevent and disrupt TBML schemes.

To more effectively address TBML, it is crucial to enhance the knowledge and engagement of customs agencies and firms involved in international trade. The Financial Action Task Force (FATF), the chief international body for AML research and advocacy, recommends an active role for customs services and public-private partnerships (PPPs) in combating TBML (FATF and Egmont Group, TBML: Trends and Development, 54–56, 58–62). Other actors in the AML space, such as financial intelligence units (FIUs), financial institutions (FIs), and law enforcement agencies (LEAs), usually lack access to the goods, trade documents, and data that would allow them to detect TBML. Even if the transaction goes through the formal financial system, the bank still may not receive relevant data. Eighty percent of all international trade is “open account,” in which banks do not receive trade documents before moving the funds (Clements and Shea, Countering Illicit Finance and Trade, 13–15). FIUs, FIs, and LEAs also typically lack knowledge about international trade, including average prices, quantities, and business practices for the goods in question (FATF and Egmont Group, TBML: Trends and Development, 38). Customs and trade firms can fill in this knowledge and reporting gap (FATF and Egmont Group, TBML: Trends and Development, 17, 51, 54).

The United States Customs and Border Protection (CBP) operates the cargo security PPP Customs-Trade Partnership Against Terrorism (CTPAT). Specifically, it is an Authorized Economic Operator (AEO) program, in which a country's customs service recognizes a company as a secure mover of goods. The program was initially formed as a trial program in 2001 in the wake of the 9/11 attacks to prevent cargo from transporting terrorist weapons. In 2006, the federal government codified and made it a permanent part of CBP (U.S. Customs and Border Protection, “20 Years of CTPAT”). The program underwent a dramatic expansion in scope and size. There are currently over 11,400 private sector members, representing 13 types of international trade businesses that together cover 52% of U.S. imports by value (U.S. Customs and Border Protection, “CTPAT”). The program now also encompasses other aspects of supply chain security, including cybersecurity, anti-forced labor, and agricultural protection (U.S. Customs and Border Protection, “20 Years of CTPAT”).To apply to become part of CTPAT, a firm must meet the program’s Minimum Security Criteria (MSC) for its industry. Crucially, the MSC requires that CTPAT members vet partners along their supply chain for cargo security best practices. Within one year, a CTPAT Supply Chain Security Specialist (SCSS) will review the company to determine if it meets the MSC or if it needs improvements before becoming a full-fledged member. Existing members are revalidated every four years in a similar process. In exchange, members receive benefits from CBP, including a reduced chance of cargo inspection, access to fast lanes, and an assigned SCSS to help address border and cargo security concerns. CTPAT also has mutual recognition agreements (MRAs) in 44 countries with similar AEO programs (CTPAT, CTPAT 101, 1).

CTPAT members enjoy AEO status in these countries and vice versa.

CTPAT and Anti-TBML Action

Anti-TBML is not a core part of the CTPAT mission. Still, CTPAT incorporates various anti-TBML practices throughout the program. CTPAT MSC requires its partner firms to implement the following measures regarding anti-TBML: establish a money laundering prevention policy document, develop a risk-based process for vetting and monitoring business partners, and train employees on recognizing, reporting, and investigating potential red flags. In turn, CBP provides bulletins on new trends in TBML, continuing education in TBML, and assistance from SCSSs (Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025). SCSSs also ensure that companies are upholding anti-TBML MSCs through the vetting and revalidation processes (CTPAT, CTPAT 101, 1). Lastly, member firms report any suspicious activity related to TBML to Immigration and Customs Enforcement (ICE) (U.S. Customs and Border Protection and CTPAT, CTPAT Warning Indicators for TBML,1).

FATF AML publications on recommendations and warning indicators are the accepted international standard. The FATF primarily creates its recommendations with national governments in mind. They thus may not apply to the customs agency or firm level. Still, they remain valuable for determining whether a program has the correct elements to counter ML (FATF, FATF Recommendations, 7).

Starting at the broadest scope, the FATF's Forty Recommendations serve as standards for countries to prevent, report, investigate, and respond to money laundering, terrorist financing, and the financing of weapons of mass destruction. These include recommendations on laws, treaties, government structures, reporting structures, law enforcement, and regulations of the private sector (FATF, FATF Recommendations, 5–7). Based on publicly available data, CTPAT largely complies with the sixteen germane recommendations. The program includes cooperation and coordination between national governments, domestic agencies, and various firms (CTPAT, CTPAT 101, 1).

CTPAT encourages firms to take a risk-based approach (Santoyo, “GMU - CTPAT Research Inquiry”). Importantly, this risk-based assessment is not static; firms must continually update their security policies as their education, technology, partners, markets, and other factors change. In turn, CTPAT regularly reevaluates partners to ensure their compliance with these principles (CTPAT, CTPAT 101, 1; CTPAT and U.S. Customs and Border Protection, Minimum Security Criteria, 25; Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025). There are still some areas where policy or information is insufficient. For instance, there is no firm-level requirement for whistleblower protection for reporting MSC violations (CTPAT and U.S. Customs and Border Protection, Minimum Security Criteria). It is also unclear, based on publicly available documents, what the procedures are for outsourcing MSC requirements, politically exposed persons, or the use and collection of statistics (CTPAT and U.S. Customs and Border Protection, Minimum Security Criteria, 3–10; U.S. Customs and Border Protection, “CBP Data.”; U.S. Customs and Border Protection and CTPAT, CTPAT 2024 Report, 3).

In 2020, the FATF and the Egmont Group of FIUs published their latest set of best practices for countries to combat TBML. These recommendations emphasize increased education across the public and private sectors, suspicious transaction reporting, sophisticated data analysis by FIUs, the participation of customs agencies, interagency collaboration, and PPPs (FATF and Egmont Group, TBML: Trends and Development, 43–62). CTPAT follows all the pertinent recommendations. CBP staff lead the program utilizing their specialized knowledge to assist and learn from private sector partners in detecting and reporting TBML (CTPAT, CTPAT 101, 1; Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025). As part of CTPAT, CBP also shares information and takes enforcement actions with other government agencies (Financial Crimes Enforcement Network, “New FinCEN Exchange”; Gianopoulos, U.S. Government TBML, 10–11, 13; U.S. Customs and Border Protection and CTPAT, CTPAT Warning Indicators for TBML, 1). CTPAT is also continually educating its partners on TBML (Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025).

The FATF and the Egmont Group of FIUs have also published a list of TBML risk indicators, designed for use by public and private sector entities across various business lines (FATF and Egmont Group, FATF TBML Indicators, 2). CTPAT provided a list of warning indicators for TBML to its partners (Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025). CTPAT's bulletin directly mentions or at least implies the vast majority of the FATF-Egmont Group risk indicators for TBML. As the FATF-Egmont Group points out, determining TBML risk is not a one-size-fits-all approach but rather depends on the specific business activity (FATF and Egmont Group, FATF TBML Indicators, 2). Thus, it is prudent for CTPAT to adapt this list to its partners' context, with a greater focus on the shipment of goods and less emphasis on financial indicators.

On paper, CTPAT possesses the necessary elements to combat TBML. However, it is unclear based on publicly available data if it is effective in practice. The CTPAT 2024 Impact Report highlights various program accomplishments and expansions, but does not provide statistics on suspicious activity reports from members or the fruits of those reports (U.S. Customs and Border Protection and CTPAT, CTPAT 2024 Report). CBP publishes data on illicit goods seizures and other enforcement actions; however, it does not disaggregate the data by TBML or CTPAT participation (U.S. Customs and Border Protection, “CBP Data.”). It is unclear if this data does not exist or if it does exist but is kept private due to its sensitive nature.

Concerns about CTPAT and TBML

There are gaps in the CTPAT program that lawmakers and regulators must address to strengthen its capabilities to address TBML and other cargo security concerns. First, while the program membership has made significant progress, 11,400 only represents a small fraction of the firms involved in moving goods across borders (Gina et al., Houston Study, 23; Jones and Singer, CBP: Trade Security, 32). Non-member firms may have insufficient security, making them vulnerable to TBML and cargo security risks (U.S. Customs and Border Protection, “CTPAT”). There is also a concern that firms lack the incentive to apply because they believe the costs outweigh the benefits (Gina et al., Houston Study, 12; Jones and Singer, CBP: Trade Security, 33). CBP has attempted to address this by identifying ways to reduce compliance costs for firms and highlighting non-quantifiable benefits, such as enhanced reputation (Gina et al., Houston Study, 12–14; U.S. Customs and Border Protection and CTPAT, CTPAT 2024 Report, 4). The program also creates an opportunity for criminal actors to gain CTPAT certification for seemingly law-abiding firms and abuse the certification to move illicit goods (Jones and Singer, CBP: Trade Security, 33). Inadequate funding, staffing, and training for SCSSs exacerbate the problems above (Gina et al., Houston Study, 53; Jones and Singer, CBP: Trade Security, 35). The result is a backlog of CTPAT applications and revalidations in which SCSSs ensure firms meet MSCs (CTPAT, CTPAT 101, 1; CTPAT, “CTPAT FAQ”). If SCSSs are unqualified or unavailable to assist members and ensure they are implementing the MSC, the risk of cargo security incidents may increase (Jones and Singer, CBP: Trade Security, 33; U.S. Customs and Border Protection, “CTPAT”).

Recommendations for CTPAT

To enhance CTPAT's ability to counter TBML and other cargo security concerns, it must clarify the role that combating TBML plays in its mission and develop its human resources to implement it. TBML must be made a core component of the CTPAT mission. As the

FATF-Egmont Group report explains, TBML is the most significant threat and the hardest form of ML for both government agencies and private firms to understand and detect (FATF and Egmont Group, TBML: Trends and Development, 38–39, 41). Thus, more resources and attention are necessary to combat it. The fiscal impact of this new criterion would be minimal; the primary goal is to increase TBML awareness, and there is significant overlap between anti-TBML best practices and existing MSCs (CTPAT and U.S. Customs and Border Protection, Minimum Security Criteria; FATF and Egmont Group, TBML: Trends and Development, 43–63).

Increasing recruitment and retention of firms would ensure greater TBML and cargo security, but should not come at the cost of diluting MSCs (Gina et al., Houston Study, 23). There is an urgent need to increase the hiring and training of SCSS. As of May 2021, there were only 114 SCSSs responsible for over 11,400 members, many of whom are large companies with extensive and complex supply chains (Gina et al., Houston Study, 15). In addition, there is no formalized training program for new hires or an ongoing education requirement (Gina et al., Houston Study, 15–16). CTPAT must hire additional SCSSs and ensure they receive strong and continual education on TBML and other cargo security issues. This training will ensure that SCSSs can properly conduct validations and assist and educate CTPAT members (Jones and Singer, CBP: Trade Security, 33; U.S. Customs and Border Protection, “CTPAT”).

Prospects for CTPAT and TBML under the Second Trump Administration

Congress codified the CTPAT program as part of the Security and Accountability for Every Port Act of 2006; it thus will exist as delineated by this law unless the legislation is changed or challenged (U.S. Customs and Border Protection, “20 Years of CTPAT”). Still, it is unclear if there will be tangible changes to the program on TBML or any other front. CBP Executive Assistant Commissioner of the Office of Trade Highsmith pushes TBML as a priority (U.S. Customs and Border Protection, “Trade News”). In turn, CTPAT also heightened its efforts on TBML (Alberto Santoyo, “CTPAT E-Mail,” July 21, 2025). There is also an enhanced threat of TBML in the current trade environment. Both the raising of customs duties and sudden policy changes enable criminals to take advantage of tariff evaders or law-abiding firms that are confused and panicked (Mia and Edwards, Organized Crime and Trade War). The 2025 federal appropriation bill includes significant funding for the Department of Homeland Security, including $4.1 billion to hire new CBP personnel. However, the bill allocates most of this funding for immigration enforcement; none is earmarked explicitly for CTPAT (Congressional Research Service, Summary: H.R.1; U.S. Department of Homeland Security, “One Big Beautiful Bill into Law”). However, this does not mean that the Trump Administration’s goals and strengthening CTPAT as an anti-TBML force are incompatible—a central objective of the Trump administration is disrupting fentanyl trafficking and the transnational criminal groups that support it (The White House, “Duties to Address the Flow of Illicit Drugs”). Narcotic traffickers regularly abuse the trade system to move illicit goods and funds (Clements and Shea, Countering Illicit Finance and Trade, 16–17). By reframing CTPAT and anti-TBML as a weapon against drug traffickers, they can attract the attention and resources they need.

Works Cited

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