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.