Money Laundering and Your Bank Accounts – Part VIII – Trade Finance

Banks and containerisation are the cornerstone of international trade.
Photo by chuttersnap on Unsplash
This is the eighth part in our series revealing exactly what banks are looking for when they are combatting money laundering.
Trade finance is one of the most common areas for laundering money. Accordingly banks throughout the world look for suspicious transactions. Avoid the following situations if you want your business to flow smoothly.

Trade in Suspicious Goods

Businesses have standard types of goods associated with their businesses. When they shift to or add items to their normal purchases or sell products that aren’t their normal business, that sets off an alarm. For example, a company that sells perishables but switches to machinery would trigger an alert.

Higher Risk Jurisdictions

Transactions involving parties in higher-risk jurisdictions automatically receive more scrutiny; activities that might pass muster in other jurisdictions may lead to problems.

Transiting Higher Risk Jurisdictions

Transactions that transit higher risk or non-cooperating jurisdictions receive additional scrutiny. That is because criminals may substitute cargo or divert funds,

Customers Involved in High Risk Activities

Banks scrutinize any customers handling risky products such as those below for possible involvement with criminal gangs or terrorists.

  • equipment for military or police organizations of foreign governments,
  • weapons,
  • ammunition,
  • chemical mixtures,
  • classified defense articles
  • sensitive technical data
  • nuclear materials
  • precious gems
  • certain natural resources such as metals, ores, and crude oil

Trade Pricing Fraud

Goods or services that are obviously mispriced are a common way to launder money and evade taxes. Central Bank authorities are well aware of this and in most cases require that their banks be alert for such activities and alert them to any such cases. And, of course, when periodic audits are conducted, this is one of the areas that receives close attention.

Misstating of the Quantity

This is a variant of Pricing Fraud where the unit cost is correct but the quantity is changed up or down to achieve the results that the company wants.


Just as corrupt governments create over-complex laws to enable graft and self-dealing, fraudsters design over-complex transactions to enable fraud in commerce. Banks are on the lookout for such transactions and are responsible to report such cases to the Central Bank.

Third Party Payments

If a transaction between party A and party B stipulates a payment to party C, this will alert the bank to look more deeply into the transaction. Obviously the could be a legitimate transaction but the method is often used to launder money.

L/C Inconsistency

If the terms of and L/C haven’t been precisely met, the bank will not honour it. If it does, either by accident or on purpose, then the examiners will conduct an investigation to determine why that was done.

L/C Amendments

Bank authorities will investigate all significant changes to L/Cs to determine the reason why the change(s) were made.

It is clear that international trade is an area in which it is relatively easy to launder money. Banks are alert to the possibilities but the sheer volume of trade makes this an area of ongoing concern.

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Money Laundering and Your Bank Accounts – Part VII – Unusual Activities

Banks Solve the Money Laundering Puzzle.
This is the seventh part in our series that reveals exactly what banks are looking for when they are combatting money laundering.

Bank-to-Bank Transactions

The size and frequency of currency deposits increases rapidly with no corresponding increase in noncurrency deposits.

You know if you expect to see an uptick in your currency deposits. If you do, pay a visit to your banker and explain to her what is happening. That will forestall any unnecessary problems.

A bank is unable to track the true account holder of correspondent or concentration account transactions.

You may have an account that receives deposits from several other banks. For example, for sales made in multiple countries plus deposits from a credit card bank. If the bank thinks you aren’t the actual account owner, then they are obligated to take action. They will report it to the appropriate authorities.

The turnover in large-denomination bills is significant and appears uncharacteristic, given the bank’s location.

There is a global effort to reduce the number of large currency bills in circulation because of their anonymity. Your account will be flagged if you process many of these through your account where this is unusual.

Changes in currency-shipment patterns between correspondent banks are significant.

Transactions between correspondent banks are tracked so that if an employee manages to bypass internal controls, she will be caught. There are several triggers to be aware of:

  1. Large volumes of small denomination bills are sold to U.S. banks. (This is a trigger in the EuroZone as well. In that case, triggering currencies are USD, GBP and EUR.)
  2. Multiple wire transfer instructions from foreign nonbank institutions requiring the bank to transfer funds to entities for which there seems to be no reasonable business purpose.
  3. Customers exchange large volumes of USD or Euros for larger denominations. This facilitates physical cross-border shipment of currency.
  4. Deposits of Euros or US Dollars by a foreign non-bank entity that subsequently transfers the funds via wire to foreign non-bank entities.

Even legitimate businesses risk losing access to their funds temporarily or permanently as well as prompting an investigation of the principals if they engage in any of these activities.

Protecting Your Information While Travelling.

Protecting Information
image by stevepb
We are interrupting our information series on the impact of money laundering controls on legitimate businesses to deal with a subject that has become increasingly urgent to many of our customers, and that is protecting their private information when traveling. We shall complete the money laundering series shortly.

Protecting Your Private Information During International Travel

Many businessmen have become worried about the increasingly intrusive nature of border inspections. Border security agents are beginning to treat information with the same level of concern as they do physical weapons. That concern is understandable but too often it leads to invasions of privacy that are not warranted. Furthermore, they can easily lead to the leakage or loss of critical commercial information or reveal embarrassing private facts. Governments should not act in these domains, but we’ve made it easy for them. So they do it.

Border Interrogation

When you cross into a country, there is no limit to the amount of information border control agents may demand. Your very first line of protection is to be normal in every possible way. Act as a businessman, a tourist or a relative. Don’t draw attention. Don’t project an aura of being special.

Answer questions matter-of-factly. Tell the truth. Don’t joke.

If they select you for further questioning, you’ll go to a separate interrogation room. They are being paid for the time they are there. Meanwhile, the loss of time is costing you money. You want to leave quickly. They want overtime pay. They will use your impatience against you.

When they finish asking you questions or perhaps before, they will ask to look into your laptop and phone. Of course, they will tell you to provide the passwords. Now the trouble starts. As an international traveler entering a country, you have no rights. You are at the mercy of the inspector in front of you. You have two rational choices and one irrational:

  1. Give up your passwords and give them the keys to your life.
  2. Give up your passwords and let them find nothing useful.
  3. Try to fight them.

We encourage option two. Give them the passwords to unlock your devices and any applications on them. Just ensure there’s nothing important for them to see.

Fingerprints, Pattern Tracing and Iris Scans

None of these are as effective as the old-fashioned password for protection – if you create a good password and change it from time to time.
As a matter, of course, you should have your devices set for complete encryption of all the data on them whether you are at home or on the road. Then, if you have any concern at all that your device may be lost, stolen or compromised, you should be certain to use a well-formed password to protect it.

Invisible Information is the Best Defense

When you cross a border, take the minimum necessary information with you. Fortunately, in the twenty-first century, you can transport minimal data easily. On the other hand, ferreting out your secrets is easier than ever, too. Especially if you aren’t careful. There are several data storage areas you need to be aware of; border agents certainly are.

  1. Your digital devices
  2. The cloud
  3. Social media

Let’s cover these in a bit of detail:

Digital Devices 1

There is virtually no possibility that you know what data can be found stored on you digital devices. Poor programming practices and lazy habits ensure that practically everyone has far more information on their devices than they can imagine. Every time we upgrade devices, we get more memory and transfer more history from our old devices to our new ones. Oftentimes it is buried so far that we don’t even know it is there. And if we don’t know it is there, we certainly can’t remove it. Some of it may be embarrassing. Some of it may be incriminating.

On top of that, as almost anyone with even a slight bit of computer literacy can tell you, erasing things doesn’t actually erase them. Generally, erasing just changes the first character to let the system know that space is available, but all the rest of the information is still there if it hasn’t been overwritten. Destructive erasure is possible with modern operating systems but it is slow and not one hundred percent certain.
Your best option is  to leave your daily-use digital devices at home.

Digital Devices 2

From now on, carry only the bare-bones hardware that you need. For example, an iPad and a Samsung phone. For communications, set up your iPad to connect to a straw iCloud account that is bare-bones and is not your regular one. On your Huawei, keep only the phone numbers of your office, home and a couple of restaurants where you have business lunches.
Pay for the equipment and cloud accounts in cash or through your company account. Do not use your credit cards.  Purchase the SIM for the phone using  cash and without identification or, at worst, use your company account; your concern isn’t anonymity, it is their collection of your personal information.

Memorize your cloud account information. Do not write it down. You will use that information later to download everything that you need.

Once  in your hotel room, you can connect your iPad to your main Cloud account and then download the business information and any apps (e.g. WhatsApp and Skype) that you need. You can then proceed about your business as normal.

Before departing the country, you will upload all of the new data to the cloud and then reset your iPad to factory specs and erase everything. Then you will connect the iPad to your innocuous straw iCloud account.

Handle your Samsung or other phone similarly. Each manufacturer handles data erasure differently. The iPhone is probably the most convenient and secure – you simply go to General->reset->Erase all settings and content, tap on that and you are done.  Rather than erasing the data, the iPhone erases the codes that are used to encrypt every bit of data on the phone. So, although the data is there, no one is going to read it.

The Cloud

Digital devices love the cloud. You probably have at least ten cloud accounts of one sort or another without realizing it, and some of us have acquired hundreds. There are a variety of ways to track the passwords for them including through special password apps, through your digital device operating system or some manual system of your own.  Once your iPad and phone are set for travel, you will connect your iPad only to your straw account. Your straw account will contain real information but not information that you wish the border agents not to see.

Social Media

This may be your biggest problem if you have been putting information on your social media that you would prefer that the border security agents not know about. They will check the most popular social media sites. Using your name and variants of it. They may also do a search of the Internet using your photo and Google’s image search function. If you don’t want everyone in the world to know something about you, don’t put it on the Internet.

If you are able, you can try to clean up your social accounts, but generally, there’s not much you can do. What’s done is done. You can start flooding your accounts with entries every day so that the investigator gives up searching before getting to what you want to conceal or can’t distinguish the wheat from the chaff, but, in general, if you’ve put it on line, if they are sufficiently interested in you, they will find what you are trying to hide if you maintain your account.

It is possible to request Facebook to completely delete your account.  Once that is done, you’ll never be able to access it again. You can find information on how to delete it here. If you still want a Facebook account, you can then create another account under a different name.

These steps are designed to protect you as you pass through borders, but you may find them useful for day-to-day work in some police states. Depending on the country you will be entering, you may find that you need to augment these steps, but they form a solid basis for travel throughout most, if not all, the world.