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International trade operates at a massive scale, making trade finance transactions an attractive medium for money launderers and criminals. They can be used to hide the illegal movement of funds; for example, by misrepresenting the price, quality or quantity of goods, or even faking their existence. Our client is a major supplier of trade finance services to its customers and counter-parties. Serving a global market, they provide numerous trade finance products and services including Letters of Credit, Documentary Collections, Standby Letters of Credits and Guarantees with a key focus on businesses with import, export and guarantee requirements.




The underlying techniques of most trade-based money laundering schemes are straightforward and relatively simple, but they can be difficult to detect by the banks as they are layered within the mass of legitimate payments flowing through the global trade system. According to a recent survey, 52% of companies report that their operations have been marginally or materially impacted by trade sanctions. Some companies are willing to circumvent the complexity of sanctions legislation as the value of the trade activity may far outweigh the consequences of the breach.


Our client wanted to complete a look back of trade finance transactions rejected for sanctions reasons. They were particularly interested in discovering whether the business teams were adhering to the sanction policy and sanctions screening procedures in place at the time of the rejections, including if a review subsequently resulted in a customer exit from the bank globally.


The bank also needed to understand if customers were attempting to resubmit trade transactions or circumventing sanctions controls, regardless of whether they succeeded. This information was required for all jurisdictions in which our client runs trade finance operations.



As this project did not fall within our client’s business-as-usual model, we had to establish a new technical environment in order to operate our bespoke analysis tool.  Having determined the technical requirements for its use, we then identified core data requirements from our client’s central systems and requested additional data, as required, from other local jurisdictional systems. 


Once the data acquisition phase was complete, we needed to reconcile the transactions from the different sources to ensure we that held a true single population of rejected trade transactions. Our bespoke software tool enable us to search the provided data by both customer and other relevant criteria, as well as analyse transaction histories for potential resubmissions.


Alongside the technical environment setup work, we evaluated the collated trade transactions against OFAC sanctions operating at the time, to determine that the transaction had been rejected for sanctions reasons and not in response to internal risk management and policy limitations. The bank has implemented several iterations of their global sanctions polices over the last few years, so our client asked to compare the differing versions in operation against the sanctions screening procedures used by trade finance. This enabled them to understand what practices were in place at different stages of the period under review and whether rejected transactions had been referred or escalated to their specialist sanctions team.


For rejected transactions confirmed as having a sanctions nexus, we then identified any other customer transactions with similar characteristics as the original declined transaction. An investigation was then undertaken to determine whether any of the new transactions were resubmissions of the declined transaction. This was achieved by comparing trade details (e.g. invoice numbers), counterparty, currency and amount to the original rejected transaction.


Our report identified whether resubmited trade transactions breached OFAC sanctions policy and enabled our client to describe with confidence their position to regulators. We made recommendations to improve the sanctions screening control environment to ensure that such breaches will not occur in the future. 

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