Two university professors are building a computer program that they said could help banks thwart crime in their international trade finance operations.
The software, which the two expect to complete this summer, is meant to flag whether a price paid for an import or export is abnormally high or low.
Such pricing is a common tactic for laundering money and evading taxes.
Armed with this information, banks would be in a better position to know if they were financing a suspicious trade, said John Zdanowicz, a finance professor at Florida International University in Miami
Huge Data Base
"We haven't found anyone else that's come up with a better way of analyzing the information." Prof. Zdanowicz said.
He is designing the software along with Simon Pak, an associate professor at the university.
The software is meant to analyze the huge Commerce Department data base on imports and exports.
The software uses this information to calculate the highest and lowest prices normally paid for goods shipped between the United States and other countries.
The professors said they have turned up some interesting leads in early tests.
For example, they uncovered a shipment of instant cameras that had been exported for $3,127 each, smoke detectors sold for $653 apiece, and salad dressing sold for $720 a bottle.
A Cover for Tax Evasion
Though extraordinarily high prices can be legitimate, they can also be covers for tax evasion, letting buyers inflate costs and thus reduce reported profits.
Prof. Zdanowicz said the first goal for the software is to estimate how much tax revenue the United States has lost from this practice.
Inflated export prices can also be used for laundering money. Paying such prices can be a way to move drug proceeds out of the United States without filing currency transaction reports.
Wooing the Banks
The trade finance software currently runs on a computer custom-built to handle a massive amount of trade finance data.
However, the professors would also like to design a personal-computer version for banks - if banks want it, that is.
Prof. Zdanowicz said that he and Prof. Pak have floated the idea before a handful of bankers, but none have expressed any interest.
But that could change if regulators become more aggressive about halting international trading improprieties.
Currently, banks face no penalties under law for financing trades that are structured to evade taxes or launder money, said Charles Intriago, a Miami lawyer and publisher of Money Laundering Alert, a newsletter.
"But I wouldn't be surprised if at some point in the future banks are required to report suspicious trade transactions" to beef up the government's war on drugs, he added.