Anti-Money Laundering and Trade Finance: What You Should Know

Due to the nature of its business, trade finance is considered a high-risk product that is frequently used by individuals and criminal organizations to launder funds, conduct terrorist financing, and evade the sanctions, regulations, and restrictions of the Office of Foreign Assets Control ("OFAC"). Financial institutions ("FIs") that provide trade finance offerings are under significant regulatory pressure to develop consistent standards to help mitigate financial crime risks. It is highly recommended that FIs establish effective controls and a proactive monitoring process for efficient risk management to address potential regulatory scrutiny.

Where to Focus

In our work with different FIs and financial regulators, ACA has observed that firms dealing with trade finance should focus on the following:

• Trade Finance AML and Sanctions Monitoring
  • Treat trade finance and sanctions monitoring differently than other AML monitoring processes (e.g., cash/wire activities etc.)
  • Focus on trade finance-specific scenarios and related monitoring
• Governance Process and Senior Management Updates
  • Clearly define the governance process with roles and responsibilities as well as the associated escalation process 
  • Focus management updates on analytics rather than numbers
• Role of Business, Compliance, and Audit
  • Create defined methodology and effective communication channels for each role
  • These roles should be aligned with the nature of business