Red flags specific to international trade

Red flags when identifying the person or entity

We have identified the following red flags relevant to customers dealing in international trade. 

• Customer has limited or no import/export knowledge or history.
• Customers are suddenly involved in the import/export of goods, having never been involved in this type of activity previously, including sole proprietor entities.
• Customer is unfamiliar with the intended use of the product being purchased.
• There is no open source footprint of the company or director/beneficial owner.
• Adverse media holdings exist on the company or director/beneficial owner.
• Open sources relating to the company indicate a different industry compared to the goods being imported/exported.
• The products requested do not fit or align with the customer’s primary business activities.
• Customer is a director/beneficial owner to companies operating in seemingly unrelated industries e.g. car export and grain import.
• The Customer operates a complex corporate structure, which does not make any apparent business sense or the transaction involves the use of multiple shell companies.
• Businesses or companies are controlled by the same group of people.
• Customer appears to conduct business exclusively with a single counter party.
• Customer prefers to pay cash even if they qualify for open credit terms.
• Customer utilises a payment method of unnecessary risk or via a third party.
• Debtors for the customer’s trade finance are associated with the customer.
• Trade is undertaken between associated parties
• Customer requests an unusual degree of confidentiality or deviation from established ‘know your customer’ processes.
• Customer provides evasive or incoherent responses to enquires on why pricing patterns, goods or jurisdictions have changed dramatically.
• Customer is unable to produce appropriate documentation to support a requested transaction e.g. invoices.
• International payments involving multiple entities appear to have connected addresses, contact details and/or key personnel.

Red flags related to open account trade

We have identified the following red flags relevant to open account trade.  

Payments and Transactions

• Transactions are in round dollar amounts.
• Unexplained changes in the volume and/or value of transactions.
• Evidence of consistent and significant cash payments, including to previously unknown third-parties.

Business

• Unexplained rapid growth of a newly formed business in an existing market.
• Transaction amounts that are inconsistent with the scale of a business’s regular activities and/or customer profile.

Customer

• Customer receives a large volume of cash deposits via automatic tellers machines (ATMs) and bank branches in a broad geographical area.
• Customer appears to conduct business exclusively with a single counter party.
• Customer sends or receives consecutive payments domestically or internationally where payment reference details are the same e.g. the same invoice number.

Movement of funds

• Transactions involve multiple parties and the transfer of ownership or the use of intermediaries to disguise the true nature of a transaction.
• Transactions are made between related parties e.g. entities with the same directors or directors who are known to each other, such as family members.
• Funds are pooled in the account of a domestic company and then sent back offshore.
• Funds are sent back and forth multiple times between the same entities e.g. the importer and exporter roles are reversed.
• The transaction involves payment by cash, wire transfer, postal money orders etc. from a third party with no obvious connection to the transaction.

Red flags related to documented trade finance

We have identified the following red flags relevant to documented trade finance.  

Value of goods

• Value of goods on the invoice is inflated/ deflated compared to market value.
• Significant price difference for the same or similar goods previously traded by the customer with no logical explanation for the price difference.
• Additional charges are included on documentation e.g. a premium handling service fee.
• Advance payments to sellers in high risk jurisdictions used with no subsequent shipment taking place.

Falsified information

• Transport documentation cannot be verified.
• Multiple or duplicate invoices and documents for the transportation of the same goods.
• Duplication of information across documentation, such as importer/exporter, goods, vessel details, seal numbers, container numbers or invoice numbers (which may be falsified).
• Obvious alterations to documents, such as seals or stamps from other banks, letter heads and invoices that appear to have been superimposed on other letters or obvious alterations to documents.
• Significant discrepancies on official documentation for the description, value, quality or quantity of goods.
• Letters of credit are for a new or recently registered overseas company which is purportedly a subsidiary of an established parent entity; however, there are no clear links between the two. • Letters of credit are amended frequently.
• The shipment does not make economic sense e.g. the use of a 40-foot container to transport a small amount of low-value merchandise.
• Bill of lading describes cargo in a container that contains sequential numbers or does not show container numbers.
• Inconsistent font/text used for inserted

Shipment

• Size of the shipment appears inconsistent with the scale of the exporter/importer’s regular business activities and/or customer profile.
• Freight, exporter/importer or customs costs are unusually high, with no logical explanation.
• There are no freight exporter/importer or customs costs for purported previous trade.
• Bill of lading has the incorrect shipping registration details.
• Packing is inconsistent with the goods e.g. perishable goods not being shipped in refrigerated containers.
• Jurisdictions involved in the trade transaction are deemed higher risk for money laundering or terrorism financing activities.

Movement of funds

• Importer/exporter roles are reversed on different documents.
• Goods are exported to countries without strict foreign exchange/import controls and have known weaknesses in their anti-money laundering, counter-terrorism financing and anti-bribery and corruption frameworks.
• A freight forwarding firm or residential address is listed as the product’s final destination.
• Multiple lines of credit are requested where the accompanying shipping manifests appear inaccurate e.g. different ports, seals or container numbers.
• Rapid transactions sent offshore are linked to letters of credit with a new/recently registered overseas company which appears to have been set up as a shell company e.g. the offshore company has no office, website, phone number or business activity.
• The transport route is unusual or indirect, does not make geographic sense, appears to cross a sanctioned country or involves jurisdictions for no apparent economic reason.

Red flags indicating illicit cash integration 

We have identified the following red flags that may indicate the illicit integration of funds as part of trade-based money laundering.

• Domestic transfers or card purchases are to pharmacies and luxury stores.
• High cash activity on a customer’s account.
• Layering of funds between multiple companies.
• Funds are ultimately withdrawn in cash or sent overseas via international payments.
• An absence of legal documents showing the nature of the commercial relationship between coordinators and shoppers.