During the past ten days I have had the pleasure of travelling to both Hong Kong and Poland to discuss and advise on the subject of international trade and receivables based financial crime and money laundering.
The drive from the new international airport in Hong Kong along the port and quayside overlooking hundreds of ships loading and unloading thousands of containers provides an immediate and graphic illustration of the sheer size and challenge that trade activity represents globally.
Money laundering through trade finance is not a new development, and in 2006 FATF drew attention to these risks and the apparent lack of action on the part of firms to counter the threat of the misuse of trade products and finance by money laundering and terrorist financiers. This was followed by updates by FATF in 2008 and by APG in 2012 amongst others, and so by the time that the FCA reported on the findings of their thematic review of firms in the UK in 2013, you might have reasonably expected that the matter was in hand.
We now know that this was not the case and that firms had been slow to recognise this risk, had failed to conduct or articulate their risk assessments and consequently had not provided appropriate guidance and training to staff on how to identify suspicious behaviour.
During 2014 the ICT training team and I have conducted extensive training within firms to support their response, and to share international best practices and developments, so that we as the gamekeepers can start to beat back the poachers.
Over the last ten days of my travel I have been struck by the professionalism and willingness of students to learn more about the subject, and this is encouraging and positive. But I am also struck by the continued lack of awareness expressed by some risk and financial crime compliance professionals who have both a direct and/or an indirect exposure through their commercial clients to money laundering typologies such as ghost shipping, under/over shipping and the misrepresentation of pricing of goods.
There are generally considered to be three means of laundering money offered by academics; through transmission services offered by firms, such as SWIFT payments; by physical smuggling money across borders; and the third is trade finance.
It is interesting to note then that only trade finance is not explicitly noted in the FATF 40 Recommendations, and I believe that this is a mistake and oversight and I am unsure why FATF have not seen fit to provide this 41st Recommendation.
My view is that the time has come for this to be added, so that everyone in every market that is familiar with these standards is prompted to add this significant threat to their risk assessments.
My concern is that without the recognition and profile that a listing as the 41st Recommendation affords, there will continue to be a lack of co-ordinated and joined up international response to this serious threat.
And the poacher will continue to find the hole in the fence and bag their spoils!