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Trade Based Money Laundering (TBML) and Sanctions Compliance

2 Part Course  |  Identify compliance risk features in core product areas and key aspects from an audit and compliance risk perspective

Trade Based Money Laundering (TBML) and Sanctions Compliance Training Course

A one-day course presented in two half-day live webinars

  • The trainer has 40 years of first practical trade finance experience with a major international bank, latterly overseeing all aspects of risk in their UK trade finance book
  • The course includes governance and compliance issues, relating them to the use of trade finance products, covering the major risk considerations
  • The varied case studies used, taken from the trainer’s personal experience, are practical examples that will greatly assist the delegate in understanding this subject.
  • The varied examples/case studies assist in identifying money laundering, terrorist financing and sanctions, as well as showing how risks can be mitigated.
  • This course is a ‘must’ for any finance, legal or risk compliance team which has oversight of trade finance

  • Introduction to the key characteristics of Anti-Money Laundering, Countering the Financing of Terrorism and Sanctions adherence.
  • Extend understanding of the principles of compliance risk, with particular reference to Trade Finance and cross border transactions.
  • Gain an insight into current trends and issues in financial crime and the risks of non-compliance, using practical examples.
  • Be more informed and therefore better equipped to understand their role and responsibilities and make considered risk decisions more quickly, based on a sound knowledge of financial crime risk management.
  • Be better placed to protect clients from financial crime risks in their own supply chains, thereby helping them to achieve sustainable growth.
  • Have key skills to protect your clients from individuals and organisations seeking to commit trade based financial crime through the recognition/identification of red flags and understanding how to respond appropriately
  • Be able to view transactions holistically with reference to AML, CFT, Sanctions and Compliance Risk
  • Have an overview of the role of correspondent banks and other financial institutions, payment methods including SWIFT messaging

Part 1

Introductions

  • Trainer & participant
  • Aims and objectives
  • Course context 

Financial Crime Compliance

  • Principally money laundering, terrorist financing, sanctions breaches
  • Current examples
  • Other areas of financial crime
  • An introduction to the nature of compliance risk in cross border transactions
  • Why are international trade transactions increasingly a target for abuse?
  • The consequences of non-compliance (for banks, corporates and individuals) 

Anti-Money Laundering (“AML”)

  • What is money laundering?
  • Why and how is money laundered?
  • The key stages of money laundering
  • Customer Due Diligence (CDD)
  • A risk-based approach to anti-money laundering
  • Money laundering and terrorist financing
  • During this session, various case studies and videos are used to show the involvement of businesses and an international bank involved in money laundering and the consequences for those entities. 

Countering the Financing of Terrorism (CFT)

  • Key differences between CFT and AML
  • The importance of due diligence and focused screening 

Sanctions

  • What are sanctions?
  • Why are they imposed and what is their intended impact?
  • Who imposes them and on whom are they imposed?
  • What is the difference between a trade embargo and financial sanctions?
  • Case study - Balthar Group was fined by the US authorities for sanctions breaches. What were the breaches and ultimate consequences for the business?
  • Dual-use goods and proliferation
  • Examples of sanctions imposed in recent years
  • The relevance of due diligence and screening
  • Case study – MC, a UK based engineering company unwittingly used to provide dual-use goods. 

Facilitation of money laundering

  • Complexity
  • Three stages of money laundering
  • Financial products vs open account
  • Co-mingling
  • Fraud, smuggling, transfer pricing, etc.
  • Capital Flight
  • Foreign Exchange
  • Examples of legitimising the movement of illicit monies.
    1. the use of fraudulent and misleading invoicing to transfer value illegally.
    2. other mechanisms used 

Correspondent banking

  • What is the role of a correspondent bank?
  • Why is correspondent banking fundamental to cross border money flows?
  • The counterparty compliance risk of using Correspondent Banks
  • The use and operation of Nostro, Vostro and Loro accounts
  • Correspondent banking infrastructure.
  • Risk profile of remitting, receiving and reimbursement parties in cross border transactions
  • Know your customer (KYC) and the impact of ”KYCC”
  • Key compliance risk areas 

Financial Institutions - as customers:

  • Compliance risk assessment framework; key components
  • Due diligence and risk assessment
  • Unacceptable customers
  • Monitoring activity – warning signals, red flags, Financial Action Taskforce (FATF) recommendations. 

International Payments / SWIFT Messaging

  • The mechanics of cross border funds transfers and nature of the payment instruction
  • Principal parties.
  • What is SWIFT, its function and operations?
  • Understanding the use and role of SWIFT “MT” message types in payments and trade transactions
  • Compliance risk.
  • Methods of international bank transfer:
  • Value dating
  • Key compliance risk areas:
  • The compliance risk exposure of US dollar transfers
  • High-risk customers requiring payment services
  • Red flag suspicious activity indicators 

Managing Risk

  • Risk Assessment and due diligence
  • Know your customer (KYC), red flags and identifying suspicious activity
  • Regulatory environment
  • Video / discussion on CDD, KYC, etc. 

Part 2

Trade Finance
 

Trade Transactions

  • Principal parties and associated risks
  • Objectives of principal parties
  • Understanding the trade cycle
  • Additional risks of trading internationally 

Description, function and operation:

  • The nature and purpose of trade finance
  • What trade finance is and why it is required
  • Why trade finance carries high compliance risk
  • High-risk components (e.g.)
  • Trade finance compliance risk characteristics. 

Comparison between international payments and documentary trade finance in the compliance risk environment:

  • Automated screening
  • Message stripping
  • Manual based due diligence 

Trade-based money laundering (TBML)

  • Definition
  • FCA Thematic Review
  • Increasing focus of criminal activity
  • Compliance considerations
  • Risk mitigation (KYC; KYCC; information screening; document checking; red flags; etc.)
  • Common methods of trade-based money laundering
  • Case study; Metal Components Ltd, involving the assessment of a business transaction, requiring identification of potential risk issues 

Core Trade Finance Products 

Trading considerations

  • Trade cycle
  • Incoterms
  • Risk considerations (counterparty, credit, FCC)
  • Case study; Aldwych Textiles Ltd, involving the review of a business in particular a series of transactions, which require further investigation to assess potential TBML risks. 

Documentary collections

  • What is a documentary collection?
  • What is the purpose of a documentary collection?
  • Principal parties and roles
  • Document requirements and purpose
  • Types; sight (DP), usance (DA)
  • URC522
  • Compliance risk assessment;
  • Case study; Abco Limited, the assessment of a potential AML / CFT / sanctions breach through the use of documentary collection transaction, requiring the delegates to identify key compliance risk issues and the need for further information to make a risk-based assessment 

Documentary Letters of credit

  • What is a letter of credit?
  • What is the purpose of a letter of credit?
  • Principal parties and roles
  • Other considerations:-
    • The independence principle
    • Application process
    • Workability
  • Different types of letters of credit (overview)
  • Trade documentation; vulnerability to abuse and compliance risk
  • UCP 600 – role of banks
  • Compliance risk assessment.
  • LC confirmation; financial engagement and responsibility; discounting
  • Case study; Advance Plant Limited. The delegates need to identify unusual features of a letter of credit request and identify the red flag suspicious activity characteristics 

Bank Guarantees

  • What are bank guarantees?
  • Principal parties
  • The characteristics of “on-demand” unconditional guarantees
  • Autonomy and the independence principle
  • Types and use of guarantees in trade (bid, APG, performance)
  • Direct, indirect and counter guarantees
  • Transferable guarantees; key compliance risks aspects
  • Foreign laws and usage
  • General compliance risk and vulnerability to criminal abuse
  • Structuring guarantees to reduce compliance risk exposure
  • URDG 758
  • Case studies;
    1. Global Laundromat looks at the use of guarantees and SBLC to facilitate cross border money laundering.
    2. Rymills Bakeries Ltd to consider the compliance risk aspects of a request for guarantee
    3. Both cases consider the further information required to undertake due diligence; use of additional information to identify unusual features and consider an appropriate course of action 

Compliance Considerations

  • Trade-based money laundering characteristics
  • Vulnerability of cross border transactions to fraud
  • Information screening
  • Document checking
  • Red flags 

Mitigating Risk

  • Know your customer and your customer’s customer
  • Understand the trade cycle and what is ‘ordinary business’
  • Compare and contrast
  • Is the complexity of the transaction necessary?
  • Follow the money, apply common sense, ask the right questions
  • The importance of the first line of defence
  • Red flags
  • Opportunity to refresh clarify key points, clarify
  • Review main learning points. 

Conclusion & next steps for action

The trainer is a highly experienced banker who worked for HSBC (and the legacy bank, Midland Bank before that) for 40 years from 1977 until 2017.

The trainer has been passionate about international trade and financing, ensuring good outcomes for both the bank and its customers. He has experience in many industry sectors, international businesses, debt syndication, acquisition finance, and credit risk and debt recovery management. His principal specialism is trade and commodities financing. During his career, he was selected for a number of key roles involving complex problem identification, analysis and resolution, leading to reductions in risk and loss and improved processes and compliance.

During his first 16 years with the bank, the trainer undertook junior, then subsequently management roles in business, commercial and corporate banking. Then, in 1993, he became a divisional credit manager, working in that role until 1995. He assisted in the structuring of new business proposals and had credit approval responsibility for business lending in Kent and Sussex. He then spent five years as a senior business banking manager (Windsor and Slough) where he led a team of 16 managers and support staff, and was responsible for relationship management for the UK subsidiaries of overseas corporations. He moved into trade finance in 2000, in London, as a senior relationship manager, working with a team of specialist trade services managers and support staff. His team’s portfolio comprised around 80 different relationships.

In 2002 he was promoted to the role of senior corporate banking manager, a position he held until 2010. The role included responsibility for around 20 large relationships, where the turnover of the clients was up to £6 billion. The portfolio was predominantly trade intensive (import/export and commodities), with the business having overseas parent companies, or overseas operations. In this role the trainer had to liaise closely with specialist departments and was also involved in marketing the bank’s business products. He was also responsible for credit risk management aspects and it was, during this time, that the trainer began running training courses, initially on the subject of credit.

The trainer spent his final seven years at HSBC (2010-17) as a senior portfolio risk manager at the Trade UK department in London. His roles there included:

  • overseeing the UK commercial segment’s trade portfolio, monitoring general performance and quality assurance;
  • providing expert advice to sales managers, credit officers and other stakeholders on debt structuring and the use of appropriate products;
  • developing analytical and monitoring models to support increased facilities or to identify adverse trends;
  • assisting corporate recovery managers in minimizing potential losses due to debt exposure or from an operational perspective; and
  • delivering trade finance training courses to stakeholders (in debt structuring and products).

In 2014 The trainer was awarded a Certificate in Trade-Based Financial Crime Compliance, further to completing a course and passing an exam run by Manchester University Business School.

Whilst trade finance is perceived to be low in credit risk, it has the potential to expose banks to high compliance risks. Banks who have failed to implement adequate Financial Crime Compliance programmes and training have incurred fines, reputational damage and faced the potential loss or suspension of their ability to operate in certain currency markets or jurisdictions.

This course is designed for personnel who are involved in Trade Finance, including bank auditors, compliance officers, operations managers and relationship directors.  It provides an explanation of the operation of the methods of payment and financing used in international trade transactions and the nature of associated compliance risks and mitigants.

The course covers all aspects of Financial Crime Compliance (including the regulatory framework) with particular regard to Trade Finance (principles and core products), Correspondent Banking, International Payments, Global Cash Management, their associated compliance risks and the suspicious money laundering/sanctions violation activity red flag indicators of each.

Through attending this course participants will be able to identify compliance risk features in core product areas and key aspects from an audit and compliance risk perspective.

The course uses a range of typologies, exercises and case studies to enable the participants to consider transactions and identify the key risk compliance features, areas of due diligence and further information required to make a risk-based assessment.

Number of places:
Part 1
Number of places:
Part 2

£795.00

Per participant per part
Discounts available for multiple place booking find out more
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