Examples of good practice
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Examples of poor practice
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A formal consideration of money laundering risk is written into the operating procedures governing LCs and BCs.
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Failure to assess transactions for money laundering risk.
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The money laundering risk in each transaction is considered and evidence of the assessment made is kept.
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Reliance on customer due diligence procedures alone to mitigate the risk of money laundering in transactions.
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Detailed guidance is available for relevant staff on what constitutes a potentially suspicious transaction, including indicative lists of red flags.
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Reliance on training alone to ensure that staff escalate suspicious transactions, when there are no other procedures or controls in place.
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Staff processing transactions have a good knowledge of a customer’s expected activity; and a sound understanding of trade based money laundering risks.
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Disregarding money laundering risk when transactions present little or no credit risk.
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Processing teams are encouraged to escalate suspicions for investigation as soon as possible.
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Money laundering risk is disregarded when transactions involve another group entity (especially if the group entity is in a high risk jurisdiction).
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Those responsible for reviewing escalated transactions have an extensive knowledge of trade-based money laundering risk.
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A focus on sanctions risk at the expense of money laundering risk.
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Underlying trade documentation relevant to the financial instrument is obtained and reviewed on a risk-sensitive basis.
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Failure to document adequately how money laundering risk has been considered or the steps taken to determine that a transaction is legitimate.
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Third party data sources are used on a risk-sensitive basis to verify the information given in the LC or BC.
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Trade-based money laundering checklists are used as ‘tick lists’ rather than as a starting point to think about the wider risks.
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Using professional judgement to consider whether the pricing of goods makes commercial sense, in particular in relation to traded commodities for which reliable and up-to-date pricing information can be obtained.
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Failure to investigate potentially suspicious transactions due to time constraints or commercial pressures.
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Regular, periodic quality assurance work is conducted by suitably qualified staff who assess the judgments made in relation to money laundering risk and potentially suspicious transactions.
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Failure to ensure that relevant staff understand money laundering risk and are aware of relevant industry guidance or red flags.
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Trade processing staff keep up to date with emerging trade-based money laundering risks.
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Failure to distinguish money laundering risk from sanctions risk.
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Where red flags are used by banks as part of operational procedures, they are regularly updated and easily accessible to staff.
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Ambiguous escalation procedures for potentially suspicious transactions, or procedures that only allow for escalation to be made to sanctions teams.
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Expertise in trade-based money laundering is also held in a department outside of the trade finance business (e.g. Compliance) so that independent decisions can be made in relation to further investigation of escalations and possible SAR reporting.
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Not taking account of other forms of potentially suspicious activity that may not be covered by the firm’s guidance.
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Failure to make use of information held in CDD files and RMs’ knowledge to identify potentially suspicious transactions.
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Trade processing teams are not given sufficient time to fully investigate potentially suspicious activity, particularly when there are commercial time pressures.
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Trade processing staff are not encouraged to keep up to date with emerging trade based money laundering risks.
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Failure to assess transactions for money laundering risk.
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Reliance on customer due diligence procedures alone to mitigate the risk of money laundering in transactions.
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