The Application Of Soft Law In Combating Trade Based Money Laundering

Trade based money laundering, a means of laundering illicit funds by international trade, is a new-comer in recent years. Owing to its quality of concealment and the potential volume of money concerned, trade based money laundering poses a great challenge to the task of international anti-money laundering. However, on the one hand, because of the global nature of international trade and the specificity of the subjects involved, it is difficult for government agencies in a certain State to collect enough information to identify trade based money laundering, which means it is far from feasible for a State alone to achieve the goal of combating trade based money laundering effectively. Namely, it is absolutely essential to cooperate internationally and unify anti-money laundering standards in this field. On the other hand, as there are controversies among different countries over the definition of money laundering and the proper control mode of it, enforcing the disclosure of trade information may involve the issue of violation of trade secrets. As a result, it is not an appropriate method to combat trade based money laundering through international treaties or agreements. Under this dilemma, Financial Action Task Force (FATF), an inter-governmental international organization in the domain of anti-money laundering and counter-terrorist financing, pioneered in putting forward a series of standards and recommendations, which are soft laws in nature, in order to arouse the international community's concern on trade based money laundering, providing reference for combating trade based money laundering internationally. Besides, FATF has been making efforts to implement the above-mentioned standards and recommendations by its special mechanism called"name and shame"sanction, to ensure that its soft laws are widely recognized and applied on a global scale.On the basis of the phenomenon of soft laws used in the field of combating trade based money laundering, this article focuses on FATF, its mechanism in securing the implementation of the soft laws it made and the problem concerned, by making analysis on the effect of FATF's soft laws in the way of case study and data comparison. Considering that China has been a member of FATF since 1997, the phenomenon of soft laws used in the field of combating trade based money laundering is posing a significant impact on both legislation and practice of anti-money laundering in China. The phenomenon should be understood and dealt with objectively: Soft law, only an alternative measure taken in the absence of a better solution to fight against trade based money laundering, is not a negation of hard law. However, in the meantime, soft law has its necessity and rationality to be used and there is still room for improvement in the future. In order to help China to cope with this recent money laundering issue more effectively, taking full consideration of the characteristics of trade based money laundering existed in and across China, the author brings forward corresponding proposals from theory, institutional and operational aspects respectively at last.