A new report has outlined 35 risk factors of Trade-Based Money Laundering that compliance teams are urged to take into account when trying to identify suspicious activity.

The Financial Action Task Force (FATF), and the Egmont Group of 166 Financial Intelligence Units identified the risk factors from a sampling of data received by the two bodies.

The report includes risk indicators on:

  • the structure of the business, including the involvement of shell companies, registration in high-risk jurisdictions, the use of mass registration addresses, the lack of an online presence, the use of nominee to conceal actual beneficial owners, appearance in adverse media (among others)
  • trade activity, including inconsistencies with the stated business, involvement of numerous third-parties in trade deals, the use of nonstandard transactions and shipping routes/methods, unconventional use of financial products, unreasonably low profit margins in trade transactions (among others)
  • trade documents and commodities, including inconsistencies across trade documents, fees/prices that do not align with commercial considerations, vague descriptions of traded commodities, missing or frequently-modified trade or customs documents (among others)
  • account and transaction activity, including late changes to payment arrangements, small end-of-day balances despite high-volume transaction activity, frequent cash deposits which are subsequently transferred to nonrelated entities, payments made nonrelated entities (among others)

The report said: “The risk indicators are designed to enhance the ability of public and private entities to identify suspicious activity associated with this form of money laundering. By no means is this a conclusive list.

“While several indicators identified may not appear to have a direct or exclusive connection with TBML, and may be indicative of other forms of money laundering or another illicit activity, they may nonetheless be relevant when trying to identify TBML.”

The latest report supplements a best practice guide published by FATF and the Egmont Group in December, which called for greater understanding and awareness from public and private authorities in all aspects of the trade process. It said: “International trade networks can attract criminals and terrorists financiers who exploit the interconnected supply chains to launder the proceeds of TBML-based money laundering is difficult, particularly when there is a lack of understanding of this technique.”

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