Combatting Financial Crime 5/5: Red Flags


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

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