Trade-Based Money Laundering

Chapter 10Red-Flag Indicators

TBML can be complex, confusing, and often hiding in plain sight. For bank compliance officers, the situation is made more difficult due to one of the basic tenets of trade finance: “Banks deal with documents and not with goods, services or performance to which the documents relate.”¹

According to the Wolfsberg Group, an association of global banks that promote AML/CFT standards, banks do not get involved with the physical goods, nor do they have the capability to do so. These limitations define the degree of scrutiny and understanding a financial institution can bring to the identification of suspicious activity.² Yet despite these self-imposed parameters, compliance officers might well have occasion to suspect unusual or suspicious activity. I also believe that financial institutions involved with financing transactions will face increasing pressure to assume a more proactive role in scrutinizing trade.

Hector X. Colon, the head of the U.S. TTU, acknowledges the debate and the difficulty and appeals for help: “TBML presents probably one of the most complex and dynamic forms of illicit money movement which undermines legitimate business and commerce. It is important that compliance officers report suspicious activity that could help law enforcement identify and investigate TBML.”³

Fortunately, a number of concerned organizations have issued red-flag indicators or warning signs that could be indicative of TBML. Some of the best originate from the ...