The Financial Action Task Force (FATF) and Egmont Group of Financial Intelligence Units have released a new guide for financial institutions and businesses providing a set of trade-based money laundering (TBML) risk indicators for people responsible for compliance, transaction monitoring, investigative analysis, client onboarding and relationship management.
Also aimed at public sector bodies involved in TBML, Trade-Based Money Laundering: Risk Indicators is designed as a practical tool to help entities identify suspicious activity associated with this type of money laundering.
It categorises risk indicators into four groups: structural; trade activity; trade document and commodity, and account and transactions.
Structural and trade activity risks
Structural risks relate to suspect trade entity structures. Risky structures include those that are unusually complex or illogical, possibly involving shell companies or companies registered in high-risk jurisdictions as well as trade entities in jurisdictions with weak anti-money laundering/counter financing of terrorism compliance or entities registered at unlikely business addresses such as high-density residential buildings or post-box addresses.
Trade activity risks relate to specific transaction risks such as trade activity inconsistent with an entity’s stated line of business, a trade entity engaging in overly-complex trade deals or in transactions and shipping routes or methods inconsistent with standard business practices.
Document and commodity, account and transaction risks
Trade document and commodity risks centre on document inconsistencies across contracts, invoices or other trade documents such as contradictions between the named parties or discrepancies between the quantity, quality, volume, or value of the actual commodities and their descriptions.
Account and transaction risks may include a trade entity making very late changes to payment arrangements for the transaction or an account may display an unexpectedly high number or value of transactions that are inconsistent with the stated business activity of the entity.
Essential reading
The risk indicators are derived from a sampling of the data received by the FATF and the Egmont Group in the course of the TBML project.
Before using the risk indicators, users are encouraged to read the guide’s accompanying notes and FATF/Egmont’s landmark report, Trade-Based Money Laundering: Trends and Developments, which provides a comprehensive overview of current TBML risks and outlines a number of best practices in mitigating these risks (Trade-based Financial Crime, 11 December 2020).
FATF/Egmont’s Trade-Based Money Laundering: Risk Indicators can be found here.
FATF/Egmont’s Trade-Based Money Laundering: Trends and Developments report can be found here.
Categories: Trade Based Financial crimes News
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