A payment carries the jurisdictions of the parties with it. If a restricted party’s account is in a restricted bank, the payment says so. The response is to hold accounts somewhere else, in a bank with no restrictions, in the name of an entity with no obvious connection to the restricted party.
The technique is the financial counterpart of third-country transshipment, and it is used alongside it constantly, because the goods and the money have to make the same journey.
How it works
An account is opened in a permissive jurisdiction in the name of a trading company. The company is real enough to be onboarded: it has an address, a director, a business description and, ideally, a genuine trading history.
Payments arrive from counterparties and are forwarded onward. What distinguishes the account from an ordinary corporate account is that essentially nothing happens locally. Money enters and leaves. Very little stays, and nothing accumulates.
FATF and the Egmont Group describe the resulting profile precisely. An account of a trade entity appears to be a pay-through or transit account, with rapid movement of high-volume transactions and a small end-of-day balance and no clear business reason1 ; payments are sent or received in large round amounts in sectors where that is unusual2 ; cash deposits are subsequently transferred to persons or entities in free trade zones or offshore jurisdictions with no business relationship to the account holder2 .
The choice of jurisdiction
Three properties matter, and they are practical rather than ideological.
Correspondent access: the jurisdiction’s banks must hold the currency the trade settles in, or the account is useless.
Regulatory posture: the country must not apply the restriction in question, or must apply it differently.
Volume: a financial centre handling large trade flows offers cover that a small jurisdiction does not.
The result is that the countries appearing in this role are frequently significant, well- regulated trading hubs rather than obscure offshore centres. That is not a failure of their regulation; it is a consequence of the fact that concealment requires volume to hide in.
Why this is where sanctions and laundering diverge
An important distinction: a laundering network wants funds to end up somewhere they can be used. A sanctions network wants funds to end up with a specific party in a specific place, which is a harder constraint.
The money cannot stay in the third country. It has to complete its journey, and the final leg — into the restricted jurisdiction, or into the hands of a restricted party — is the point at which the structure is exposed to a record it does not control.
That is why the accounts have such a distinctive shape. They are not stores of value; they are conduits, and conduits look like conduits.
How it is caught
Balance and flow profile. An account whose inflows and outflows match, whose balance is negligible and whose activity has no local component is describing itself. This is one of the few purely quantitative indicators in the whole field.
Counterparty geography. The corridor structure of the account — where money comes from and where it goes — is visible to the account bank and to any correspondent in the chain, and it either matches the declared business or does not.
Payment third parties. FATF and Egmont flag payment for imported commodities made by an entity other than the consignee with no clear economic reason — for instance by a shell or front company not party to the trade3 . Both are ordinary questions a trade finance reviewer can ask.
Aggregation at the FIU. Layering across several banks is invisible to each of them and visible to the financial intelligence unit that holds all their reports, which is the structural reason FIUs exist.