Funnels

Another one on TBML

Trade Based Money Laundering is at the basis of the recently published advice on ‘funnel accounts’ – accounts in which illicit money is coming in from many sources, is used to buy and ship goods, which are then subsequently sold.

An article about this mentions that “ the main challenge is discerning between legitimate and illegitimate trade activity “. There is no rule book to describe what is allowed and what not. More than ever a risk based approach combined with adequate training of all staff involved in the operations of processing trade and payments transactions is required.

As the article indicates “ organisations are encouraged to make use of guidance, advisory notes, case studies and typologies as the basis of training “. And that’s exactly what we do in our TBML training.

Rolf

See also
http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2014-A005.pdf

The end of a monopoly - what now?

Another warm weekend in Singapore and time to catch up on reading. Reading this article (http://www.economist.com/news/special-report/21601624-and-no-end-new-ways-pay-your-bills-end-monopoly ) on the growing percentage of payments done via mobile networks, flashcards, internet payment gateways, I think about the impact on the world of AML/CFT.

Yes: banks are losing their monopoly on the execution of payments, although I don’t believe that banks will ever be completely out of the picture. The payments infrastructure that banks have built is not something that can easily be replaced. And interbank and cross border infrastructure (SWIFT, SEPA, domestic clearing networks etc.) only add to that.

No doubt the alternatives to traditional modes of payment will increase and likely banks will play a smaller (relative) role in the overall payments world.

So what does that mean for AML/CFT? Assuming the AML/CFT risks are identical in these new forms of payment compared to payments via the regular payment channels, the danger sits more in (a lack of detection) than in anything else.

Banks have – voluntarily but more often forced by regulators - invested heavily in monitoring and screening solutions. If the payments landscape changes drastically and players that are potentially not even under supervision from the banking regulators execute an ever increasing portion of payments, what does that mean for the risk profile of a country or industry segment?

An interesting problem without immediate answers. Views are welcome…

Sugar at $240 per pound

We found the following articlehttp://www.economist.com/news/international/21601537-trade-weakest-link-fight-against-dirty-money-uncontained?frsc=dg%7C  of particular interest, so we thought we’d share our views… . Trade Based Money Laundering (TBML) is defined as “the misuse of commerce to get money across borders”. The most common method is to misrepresent the value of goods exported or imported. The article mentions some examples: plastic buckets from the Czech Republic that supposedly cost $970 and sugar from Iran in one transaction was priced at $240 per pound. If the price is ‘almost right’ these sort of transactions will of course be difficult to detect. Just as the use of legitimate ‘re-invoicers’  makes it harder to find out if the underlying transaction is misused to transfer illicit funds from one country to another.

Since TBML uses legitimate transactions to hide illicit proceeds, financial institutions will have to guide staff involved in handling these transaction. Client facing bankers, branch staff and trade finance operations departments all need to be made aware of the potential practices employed by money launderers. The need for ongoing training cannot be overestimated!

iKYC has launched a TBML training last year and we’ve built up a bit of a reputation in the field. If you’d like to know more, don’t hesitate to contact us. 

ROlf

Know Your Country

After a busy week - for those of you who don’t know yet: building a business is fun but also a lot of hard work ;) - time to do some background reading. I spent a bit of time on this site http://www.knowyourcountry.com/ . 

Looks interesting and pretty comprehensive. Anybody any ideas or comments?

ROlf

AML - the fastest growing risk and compliance segment

Saturday morning in sunny Singapore and reading up on some recent publications. See for instance this Burton-Taylor report on trends in the risk and compliance industry ( http://www.burton-taylor.com/samples/B-T_Global_Risk-Compliance_Competitor-Segment_Analysis_2014-Information_Kit.pdf ) which states “…The Fraud Prevention segment, at USD1.99b and Anti-Money Laundering (AML)/Know-Your-Customer (KYC), at USD271.7m, are the fastest growing, with five-year CAGR of 16.67% and 19.91% respectively…….”

This reflects what we at i-KYC see in our daily practice. The companies we work with usually have their more traditional risk areas – like credit risk, market risk and fraud prevention – well under control. Although AML/CFT is a well-known phenomenon in global financial institutions, many regional and local players still have a long way to go.

The AML/CFT industry as a whole – and maybe we should add FATCA and Anti Bribery and Corruption to that – have developed fast over the last 10 years, but both in awareness, training, organization and tooling there is yet substantial work to be done. To reach the level of professionalism, quality and efficiency of other risk and compliance functions perhaps we can learn more from our colleagues?!

ROlf