Unmasking trade-based money laundering in SADC’s shadow economy

When Namibia was placed on the Grey List by the Financial Action Task Force (FATF) in early 2024, most of the national attention fell on the Financial Sectors, both banking and non-banking, regulatory bodies and legal frameworks. However, as we follow these developments closely, one cannot help but wonder if we are focusing too narrowly. While the issues flagged in the Grey Listing process did not explicitly mention it, there’s an equally serious risk lurking quietly in our economy: Trade-Based Money Laundering (TBML). It is an African problem, and arguably a global one, but for a country like Namibia positioned as a trade and transit hub for the region it is a major risk one cannot afford to ignore. What makes TBML so dangerous is how well it hides in plain sight. Unlike the stereotypical image of criminals moving big black bags of cash across borders, TBML often looks exactly like legal business. Fake invoices, mispriced goods, shell companies, and fictitious trade routes. These are the tools that criminals use to wash dirty money through legitimate import and export systems. It happens through customs, through freight companies, through clearing agents and it is all wrapped up in paperwork that, on the surface, looks fine. That’s the scary part. Namibia plays a key role in the region’s trade network. With our ports, transport corridors like the Walvis Bay Corridor, and our connections to Botswana, Zambia, Angola, and South Africa, we are a natural transit point for cross-border commerce. Ordinarily that is something we should be proud of. However, it also means we are vulnerable. If the relevant parties do not keep a close enough eye on what moves through our systems, not just the physical goods, but the money tied to them, we risk becoming a laundering zone for money from all over Southern Africa. While TBML is not among the reasons for Namibia’s Grey Listing, the episode should serve as a wake-up call to the broader risks that accompany a globalised economy and increasingly sophisticated financial crime. The traditional Anti Money Laundering (AML) controls such as customer due diligence, suspicious transaction reporting, and bank-level monitoring do not easily apply to trade. The customs system and the financial system still operate in separate silos, and that gap is where TBML thrives. This issue is especially complex within the Southern African Development Community (SADC). While we benefit greatly from regional trade integration, there is no denying that the differences in how each country enforces customs and AML rules create weak spots. It is possible for criminals to exploit one country’s lax controls to move money or goods into another with stricter systems, all under the cover of normal trade. In practice, we simply do not have the regional coordination or real-time data sharing needed to stop that. In a practical hypothetical scenario, a company in Zambia wants to move illicit funds. They might over-invoice machinery from a Namibian supplier and wire the inflated payment as if it were just a business transaction. Or a diamond trader in Angola under-declares the value of a shipment routed through Walvis Bay, slipping money out of the system without raising any red flags. These are the types of schemes we should be more worried about considering that they are not science fiction. They happen, often undetected, in places just like ours. To be fair, Namibia has taken some important legislative steps. One of the more recent developments includes a change in regulation that disallows Structured Market Access (SMA) trading, a mechanism that allowed for indirect offshore investments and was increasingly viewed as a weak point for money movement and ownership opacity. While the SMA model was not directly tied to trade, its dismantling does reflect a growing awareness of financial structures that can be abused. The change has disrupted parts of the capital market, but it was necessary. The long-term goal is to tighten financial oversight and ensure full transparency in ownership, investment, and money movement. Furthermore, we cannot ignore the role of the private sector. Freight forwarders, customs brokers, warehousing companies, these are the boots on the ground. They are in quite a unique position to spot red flags before any regulator does. However, do they know what to look for? Are they trained? Are they legally required to report suspicious activity? In many cases, the answer is no. That needs to change. We should also be investing more in technology. Other countries have begun using advanced analytics, artificial intelligence, and blockchain to track trade flows, verify invoices, and flag unusual trading patterns. Namibia doesn’t need to reinvent the wheel, but we do need to modernise. If the Namibia Revenue Agency (NamRA), the Financial Intelligence Centre (FIC), and others can start integrating these tools, we will be much better equipped to detect TBML before it becomes a full-blown national risk. At the end of the day, trade-based laundering is not just a financial crime, it is an economic and governance issue. It drains tax revenue, distorts market prices, corrupts funds, and threatens legitimate businesses. If we do not act, we will not just risk financial isolation, we risk undermining the very trade systems we have been working so hard to build. Therefore, it should not be viewed as a cause for panic, however it is all about preparation. The Grey List may not have mentioned TBML by name, but we’d be foolish not seeing the warning signs. We are in a pivotal moment not just to fix what was flagged, but to go deeper and address the blind spots before they become front-page scandals.* Karischa Schmidt is the group compliance officer at Old Mutual Namibia.**

Unmasking trade-based money laundering in SADC’s shadow economy

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Republikein 2025-05-09

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Unmasking trade-based money laundering in SADC’s shadow economy

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