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Common warning signs

There exist certain features in trade finance transactions which may provide a warning sign that a problem should be noticed or dealt with. The following list is not exhaustive and each bank should ensure it has its own comprehensive list and guidelines.

• Absence of a transport document and/or pre-accepted discrepancies and/or unauthorised alterations are made to documents.
• Inconsistency with customer strategy and/or unnecessarily complex structure and/or non-standard clauses.
• Excessive client pressure and/or avoidance to provide clarity.
• Description of goods not matching, and/or military or dual-use goods.
• Inconsistent shipment locations /Quantity of goods exceeds known capacity of containers.
• Changes of address.
• Future dated bills of lading.
• Unusually favourable payment terms.

 Trade products in general

• Use of a trade finance product to add legitimacy to transactions between countries where such an instrument would not normally be in common usage or where it is inconsistent with a company's usual business activity.
• Letters of credit that are frequently amended and/or extended without reasonable justification.
• Frequent changes within a letter of credit to the address of the beneficiary or location of payment.
• Significant discrepancies between the goods description and the actual goods shipped.
• Obvious inconsistencies between the market value of a commodity and the amount actually invoiced.
• Size of the consignment not in line with a client's previous trading activity.
• Type of commodity is inconsistent with a client's normal business.
• The transaction reveals links between traders at both ends of the supply chain.
• Misrepresentation of the quality and/or type of goods.
• Over-valuation of the goods.
• The commodity is transhipped through one or more jurisdictions for no apparent economic reason.
• Unusual shipping routes or transhipment points.

 Adapted from Asia/Pacific Group Report on Trade Based Money Laundering July 2012

A more detailed analysis of financial crime, together with specific examples, can be found within the Financial Crime module at www.tradefinance.training