Trade-based laundering – is automation the key?

Written by Dawn Fisher on Tuesday January 27, 2015

Having just spent the last week in Singapore training on the risks of financial crime in trade finance, I read with interest a report by PwC on addressing money laundering risk in the trade finance system.

Whilst this report quite nicely addresses the risks and methodologies of money laundering risk in trade finance and some of the associated considerations for institutions, I would like to put in my tuppence worth in relation to automated ‘anti-TBML’ monitoring.

Having conducted training in this area I would argue that, in my experience of training on this subject across a number of both Tier 1 global, and smaller local, banks; institutions are already undergoing such information gathering and analysing exercises and employees appear well-versed in utilising online databases to check vessels and container numbers etc. I don’t think this is the problem.

The danger of some of the so-called automated solutions is potentially the over-reliance then placed on such systems. Having spent a number of years implementing, testing, running as BAU, then retesting and tweaking (and so on….) automated systems, I am well aware of the advantages, but also cognisant of the pitfalls.

Having a system that screens unstructured data for potential red flags and anomolies is fantastic, but there is, in my opinion, no substitute for the training of employees and the development of expertise in certain areas. The danger of too much automation is the ‘McDonaldsisation’ of trade processing, something I think we already see in other areas of banking, where the review of output simply becomes another operational process undertaken by those with little or no knowledge of the bigger picture.

Trade finance brings its own unique challenges and whether the documents are reviewed manually, or the information regarding the trade is input into a system and alerts are thrown out, someone still has to review the information so I think institutions would be better placed to invest in developing specialisms at Relationship Manager level across product sectors where they do not currently exist and to invest in the upskilling and training of trade services employees to recognise potential money laundering situations whilst encouraging a holistic view of the whole trade process by all parties.

Automated systems are great, but it still comes down to people to understand the information and make the appropriate decisions so, as an institution’s first line of defence and arguably its greatest asset, this is where we should be seeing significant investment.

For more information on how the ICA can assist please visit: http://www.int-comp.org/specialist-trade-based