Mitigating Trade-Based Money Laundering

What are some examples of Trade-based Money Laundering?

• Manipulation of prices to facilitate excesses of cash, or value being transmitted between jurisdictions
• Manipulation of quantities, or grading of goods

What are the Bank policies to tackle TBML?

1. Questioning the purpose of facilities - Where this is unclear, this could raise some questions. Also, if there is the involvement of trade facilities lacking commercial justification – this could be a clear sign of some ill intent
2. Excessively detailed and complex requirements for an otherwise simple trade would trigger a review
3. Mispricing or significant pricing discrepancies - These discrepancies are recognised through a comparison with actual market prices
4. Common themes - Some organisations have taken the view that certain goods have been commonly used in known money laundering schemes, and therefore, should go through an enhanced check

Dual use goods also cross over to the military and other dangerous materials. Goods are subject to screening procedures, and banks will maintain a list of items that are known to have potentially hazardous uses, such as certain chemicals like sulphur and fertilisers. Thus enhanced checks are crucial.

What are some red flags that may be picked up on?

• Sequential numbers on containers
• Changes to any named parties on transactions
• Missing/absent documentation
• Odd and confusing contacts from clients
• Change of circumstances that appear to have limited commercial gain or make little sense

How can we identify Trade-based money laundering?

1. Identify checking is key – we must understand parties to a transaction which may include suppliers, shipping agents and any other parties to the chain of sale
2. Robust procedures to check key documentation – These may include: Invoices, packing lists and bills of lading
3. A commercial sense-check on trade routes and shipping methods
4. Review for any sanctioned or blacklisted names
5. Enhanced checking for red flag issues
6. Escalation and approval processes must be put in place

How can these risks be combated?

(1). Policy and Controls – This includes:

• Proper identification and monitoring of risks
• Effective staff training to equip them with the relevant skills
• Tailored approaches must be made to specific product and country risks

(2). Data sources and internal risk measurement – This includes:

• Name screening information
• Case specific criteria

(3). Connection to the outside world – This includes:

• Governance needs to be further enhanced
• Professionals should be trained on the procedures and be aware of what circumstances warrant escalation