By TIOL News Service

NEW YORK, APRIL 24, 2013: WHEN investigations by the FBI recently revealed that Ralph Lauren Corporation, a New York-based lifestyle company and fashion retailer, was bribing Argentinean Customs officials to obtain improper clearance of its merchandise, the company sought to cooperate with the US Department of Justice. Ralph Lauren Corporation signed an agreement with the department to pay an US 2,000 penalty to resolve the allegations that it violated the Foreign Corrupt Practices Act (FCPA). In addition, the US Securities and Exchange Commission announced a non-prosecution agreement with RLC, in which the designer brand agreed to pay US 4,846 in disgorgement and prejudgment interest. For five years, this company had utilised fraudulent trade misinvoicing tactics to funnel bribes to Argentinean customs officials for obtaining clearance for its merchandise without proper paperwork.

"Such misinvoicing of trade transactions to mask bribes to government officials, are used by companies and individuals around the world to evade taxes, or by human traffickers to launder the proceeds of sex slavery, and by terrorists to finance deadly attacks," stated long time authority on financial crime, Raymond Baker., Director, Global Fianancial Integrity, a Washington, DC-based research and advocacy organization. "Trade misinvoicing is also one of the biggest causes of poverty, a serious impediment to national security, and it threatens the stability of the international financial system," he added.

Such deliberate misinvoicing of trade documents used to launder all types of illicit money, cost the developing world roughly US .69 trillion in illicit financial outflows from 2001 through 2010. In order to tackle trade misinvoicing, GFI recommends some policy solutions, to be implemented globally, including elimination of anonymous shell companies, transparency and disclosure of trade data, besides customs reforms and data access.

Ready availability of information on the beneficial ownership and control of companies, trusts and foundations in the public records is necessary to prevent shell companies being used as shields of anonymity. All countries should be encouraged to make all trade data publicly available online on a monthly basis, identifying products traded by the 10 digit Harmonized System identifications. Accessible trade data can do more to curb abusive transfer pricing and other trade mispricing than any other process. Importers and exporters need not be identified in the data.

Countries also need to prioritise moving sophisticated software to analyze international price norms into the hands of Customs officials in developing countries. Combined with access to better trade data, this would make it easy for an average Customs official to detect which transactions fall outside the range of international pricing standards in real time, increasing the ability to enforce customs duties at ports of entry.

In addition to these recommendations, GFI also suggests that parties to a cross-border sale transaction also needs to sign a statement in the commercial invoice certifying that no trade mis pricing had taken place. While this may not deter criminal forms of trade misinvoicing, it could discourage a number of corporate actors from engaging in the practice. Argentina, an influential member of the G20, needs to push its peers to adopt meaningful standards to eliminate anonymous shell companies, suggests GFI. Meanwhile, Big Brother Is Watching.