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Trade Finance Series: Trade Based Financial Compliance - A Force for Good

26 January, 2018David Morrish

TradehamburhCompliance, in general, doesn’t always get good press. Trade Finance Compliance is no exception.

In the UK, following the FCA’s Thematic Review of Banks’ control of financial crime risks in trade-finance, obligatory ‘recommendations’ were made on the processing of trade business. These were followed just as quickly by cries of anguish from some quarters that the regulators ‘didn’t understand trade finance’. Actually, they understood it rather better than they were given credit for.

And whilst significant additional responsibilities have been placed on banks, there is a serious point to all this. I have always viewed trade finance as being the ‘real economy’ with goods being manufactured, shipped to innumerable destinations and financed at different stages along the way. But if that is the real economy then there is an equivalent dark economy lurking below.

Last month, I represented The London Institute of Banking and Finance at the American Bankers Association (ABA) Financial Crimes Enforcement Conference in Maryland. I attended some excellent presentations with many sobering statistics on offer.

In one it was stated that most of the $64 billion in illicit drug sales in the United States are moved via trade based money laundering, although most by the hard to track open account settlement process.

moneyCustomer Due Diligence and Know Your Customer are compliance mantras yet it was still possible for reputable unwitting US manufacturers to find their components destroying lives when used in Improvised Explosive Devices (IEDs). Perhaps even more worrying, parts were also to be found being used in the process of Uranium Enrichment in countries suspected of illicitly developing nuclear weapons. 

11th January was Human Trafficking Awareness Day. According to UNICEF 2 million children are estimated to be victims of trafficking each year. And the proceeds of this modern slave trade get laundered: somewhere...

On only a slightly lighter note my ‘favourite’ story came from China. Bitcoin mining causes electricity troubles in China was the intriguing heading of one article as police raided a warehouse full of computers mining Bitcoin with stolen electricity!

So it’s a major battle against well-organised crime and financial institutions know that they must play their part.

What LIBF are doing about it

At LIBF we are helping to sharply increase awareness through the introduction of a new qualification, the Certificate in Trade Finance Compliance (CTFC). It isn’t a silver bullet to stop the bad stuff happening but it is an important development in helping the fight against trade based financial crime. It’s already being studied in over twenty countries around the world: we are doing our bit in promoting compliance as a force for good.

Contact us to find out more about the course, call Student and Customer Services on +44 (0)12 2781 8609.