The Financial Action Task Force (FATF) and the Egmont Group have published a report on trade-based money laundering (TBML) risk to assist the public and private sectors with better identifying risk within international trade and its associated supply chains.
The report focuses on increasing awareness around all aspects of the trade process, in an effort to ultimately increase opportunities to detect and successfully disrupt TBML and terrorist financing. It highlights the prominence of trade financing process exploitation, urging lenders to ensure that they conduct appropriate due diligence around complex corporate structures and documentary inconsistencies, among others.
With 90% of world trade travelling by sea, it is clear that the maritime industry is the key artery for illicit trade. The supply chains that underpin the industry are gargantuan and, while it took regulators some time to shift their focus from primarily financial institutions, the past 2 years have shown that nobody in this industry that is engaging in illicit practices, or using shortcuts in their compliance processes, is safe.
The FATF & Egmont Group report, as well as previous advisories from OFAC and OFSI, make it clear that targeted risk management is crucial, and that due diligence should include monitoring the underlying trade activity itself.
We take a look at the key risk indicators for the maritime industry according to the report, its importance, what you should be doing as a consequence, and how Pole Star can help.