TBML – a hopeless case?

RHT GRACE (http://www.rhtgrace.com/) organized another networking session yesterday; an interesting evening about Trade Based Money Laundering. The presentation and following discussions highlight the lack of definition and guidance from regulatory bodies, leaving financial institutions in the dark. Investing in systems is needed but at the same it’s hard to justify the benefits of dedicated TBML systems while lots of trade transactions don’t use traditional trade finance products like L/C’s. As a consequence financial institutions just see the bare transactions without any information on the underlying physical goods or values. What’s more is that something like tax evasion is a much sexier crime to attract focus and funding.

So where does that leave a financial institution? Can nothing be done? Well, it’s not easy but it’s not rocket science either and we at i-KYC actually have quite a bit of experience in this area.

First and foremost the organization needs to recognize that trade is different. It’s a separate, specialized part of a financial institution, with dedicated, often complicated products handled by specialists. That fact needs to be reflected in the AML program to start with and needs to lead to a dedicated section in the AML/CFT policy, a clear risk appetite statement and finally an implementation in the organization by means of procedures and training.

A key aspect in all this is of course that the organization truly knows its customers…. the phrase Know Your Customer should not be about just ticking the box but about genuinely understanding customers and their transactions.

If you want to know more about our dedicated TBML programs contact us.

Rolf

W:          www.i-kyc.com

E:            rolf@i-kyc.com

                 

Ticking the box or more?

In the work we do with financial institutions we use concepts that are familiar to most you. The 3 lines of defense model, taking a risk based approach, defining a risk appetite and assessing an organization against this are a few key examples of these.

That’s an approach that goes well with our fellow AML/CFT practitioners and compliance officers in general. If we talk to the first line of defense though – whether it be sales staff, relationship managers, the trade finance department, tellers, payment processing staff or support staff – we often find some skepticism when we take this approach.

In the front line there are 2 things we notice. First there is a clear and explicit desire to know ‘what is allowed’. As a specialist or advisor we’re asked to give direction and guidance on client onboarding, filtering treshholds, documentation requirements and more. Understandable but what is needed is that the organization takes an approach in line with its own policies and guidelines. An advisor can share best practices but every organization is different.

Secondly we notice that the majority of staff still believes that compliance costs money and that the organization should do the minimal and not more. Even though most management and staff are aware that non-compliance is expensive there’s little desire to do more than just ‘tick the box’.

Just curious if this is something that others see as well, we welcome your thoughts and reactions.

Rolf

E:  Rolf@i-KYC.com

W: www.i-kyc.com