AML CHALLENGES
Demand forecasting is the art of predicting a
customer’s product desire. Businesses strive
to foresee the future of commodities by
implementing quantitative and qualitative
assessments. Insight results in a drive in
sales that leaves the market in the “black.”
However, the future of some goods is clear.
Historical tax and import/export mandates,
coupled with prevailing trends, all but
assure the future of these highly profitable
vendibles is so bright that retailers and
financial institutions need to wear shades.
Authors have long documented the strug-
gles associated with the sale of legal com-
modities, through a system of state and
federal statutes and taxes, which become
illegal upon transportation and/or misuse.
Yet the supply and demand of various legal
goods allow the retailer to deposit the pro-
ceeds, increase their account balances and
continue to restock the items to perpetuate
the profitable cycle and, by default (or in
many cases intentionally), sustain black
and gray markets. Alcohol, cigarettes, cellp-
hones, syrup, cheese, and now various mar-
ijuana changing legalities are presently on
the forefront of this topic. With each prod-
uct, it was only when the introduction of
man’s greed for financial gain did the abuse
commence of these otherwise legal com-
modities. Whereas, financial institutions
documented the increased sales and/or
purchases of exploited items as suspicious
activity, the government also began to rec-
ognize the potential abuse of these com-
modities and their associated danger to the
welfare of society.
As trafficked commodity proceeds were once placed directly into financial institution
accounts, the trending presence of thriving money laundering conduits allows illicit monies
to be exchanged at the retail level for exploitable items to only then be layered into the finan-
cial institution as “clean money.” This pattern is reminiscent of a simplified, domestic Black
Market Peso Exchange.
With the example of cigarettes, this legally sold tobacco product becomes egregious contra-
band once it crosses a state line. The ability to resell this product on the black market for a
considerable profit margin, coupled with limited risk, is an invitation for high reward. Not
only do the traffickers profit, but the wholesale businesses have an upsurge in bulk quantity
sales. This black market commodity assures a high yield but also guarantees a growth in
associated crimes. In fact, at a 2016 federal court sentencing of a cigarette trafficker, the pre-
siding judge called cigarette trafficking “a clear and present danger to the health and wel-
fare of the country.” 1 Discount and convenience stores on highways near state borders all
but advertise your last chance to be a cheat and avoid the higher fees and taxes found in
your state. Literally, buses full of passengers make multiple stops to allow passengers an
opportunity to purchase cigarettes in a “smurfing pattern” in an effort to circumvent report-
ing requirements, taxes and/or laws.
Communities are ravaged when contraband cigarette traffickers become targets of armed
robberies, either for the tobacco product or for the cash used to purchase said commodities.
The purchase of the cigarette cartons is typically conducted with currency in a structured
format, in violation of federal law.
False businesses are often created to surreptitiously purchase the cigarette cartons and hide
the true identities of the perpetrators. While some culprits have been identified, many
wholesalers who sell the very commodity known to associate with funding terrorism, go
largely undetected as the “money cleansing process” begins inside the store walls.
With the example of cellphones, phone trafficking “is driven largely by the massive profits
made by exploiting the price difference between smartphones sold in the U.S. and overseas.
Americans who agree to two-year service contracts with their cellphone company can buy
the latest iPhones for about $200—a price subsidized by the carrier. In Hong Kong, an iPhone
can be sold for as much as $2,000.” 2 While some carriers have since nixed contracts and no
longer subsidize the cost of the phone, the retail price for a cellular phone in the U.S. remains
significantly cheaper than the expensive, international counterpart. This causes cellphone
wholesalers, much like cigarette wholesalers, to rejoice over the net profits related to cell-
phone sales, and to happily peddle this commodity directly or indirectly overseas, contrary
to law and export regulations.
1 Frank Green, “Cigarette trafficker sentenced in federal court in Richmond to 16 months,” Richmond Times-Dispatch, December 1, 2016,http://www.
richmond.com/news/local/chesterfield/article_73b9da96-dd52-5b66-b84e-5b7683c53433.html
2 Gerry Smith, “Inside The Massive Global Black Market For Smartphones,” Huffington Post, July 22, 2013, http://www.huffingtonpost.com/2013/07/13/
smartphone-black-market_n_3510341.html
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