Is remittance cost a driver of trade misinvoicing? A case study of Vietnam

Abstract:
Purpose
This study aims to investigate the impact of remittance costs on trade-based money laundering (TBML) and provide insights into the relationship between remittance costs and TBML, particularly focusing on import over-invoicing and low-income trade partners.

Design/methodology/approach
Utilizing an extended gravity model for TBML, bilateral data from Vietnam spanning 2011 to 2019 are analyzed to examine the correlation between remittance costs and TBML.

Findings
The study reveals a positive association between remittance costs and TBML, highlighting the significance of reducing remittance costs to curb TBML.

Research limitations/implications
The research is limited by the availability of data and focuses solely on Vietnam, implying potential variations in other contexts.

Practical implications
Policymakers should consider reducing remittance costs as a strategy to combat TBML effectively.

Social implications
Lowering remittance costs could contribute to the prevention of illicit financial activities, fostering economic stability and social development.

Originality/value
This study provides novel insights into the relationship between remittance costs and TBML, offering valuable implications for policy formulation and anti-money laundering (ML) efforts.