The company regularly understating the value of goods exported is an indicator of possible money laundering because it may suggest that the company is involved in trade-based money laundering (TBML), which is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins or finance their activities. One of the common TBML techniques is over-invoicing or under-invoicing, which involves manipulating the price, quantity or quality of goods or services in order to transfer value between the importer and exporter. By understating the value of goods exported, the company may be transferring funds to a foreign counterpart who is either a co-conspirator or a third-party money launderer, who will then pay the company the difference in cash or through other means.
This way, the company can avoid currency reporting requirements, evade taxes, conceal the source and destination of funds, and integrate the illicit proceeds into the formal economy.
References:
* ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 381
* Trade-Based Money Laundering: Trends and Developments, FATF-Egmont Group, December 2020, page 282
* Trade-Based Money Laundering and Terrorist Financing, Global Investigations Review, September
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One of the criteria that the Financial Action Task Force (FATF) uses to define non-cooperative countries and territories (NCCTs) is the lack of adequate rules for the licensing and creation of financial institutions, especially those with no or minimal presence, and the lack of effective systems for checking the backgrounds of managers and beneficial owners of such institutions. This criterion aims to prevent the establishment and operation of shell banks or other entities that can be used for money laundering or terrorist financing purposes.
The FATF requires that countries and territories should have laws and regulations that ensure that financial institutions are subject to adequate licensing or registration procedures, that the authorities have the power to deny or revoke licenses or registrations, and that the authorities have access to information on the identity, reputation, and financial soundness of the managers and beneficial owners of financial institutions.
References: = Some of the references that support this answer are:
About the Non-Cooperative Countries and Territories NCCT Initiative, Section "The review and listing process": "The FATF established at that time four regional review groups (Americas, Asia/Pacific, Europe, Africa/Middle East) consisting of representatives from the FATF member governments that served as the main points of contact with the reviewed country or territory. ... The review groups gathered relevant laws, regulations and other relevant information, analysed this information against the
25 NCCT criteria, and drafted a report that was sent to the jurisdictions for comment." Annual Review of Non-Cooperative Countries and Territories 2006-2007: Eighth NCCT Review, Annex 1: "List of Criteria for Defining Non-Cooperative Countries or Territories", Criterion 1:
"Licensing and creation of financial institutions, in particular those with no physical presence, and the ability to obtain information on the beneficial ownership and control of such institutions." FATF (Financial Action Task Force) Countries 2024 - World Population Review, Section "Blacklisted Countries": "These are countries which were previously placed on the grey list and advised by the FATF to adopt the recommended financial security procedures, but have either failed or refused to do so.
Blacklisted countries may be labeled as Non-Cooperative Countries or Territories (NCCTs)."

Explanation