An analyst reviewing trade finance transactions notices an increase in price of 25% over 12 months for commodities with the same specification and quantity. Which action should the analyst take?

Question

Options

• AProduce an investigation report that finds evidence to substantiate the analyst's suspicion and
• BProduce an investigation report that considers client activity and factors that may have
• CProduce an updated due diligence record for the client so that monitoring can be enhanced.
• DProduce a SAR/STR that describes apparent trade-based money laundering and submit to the

• A
  7% (4)
• B
  74% (40)
• C
  4% (2)
• D
  15% (8)

Explanation

Trade finance transactions involve the financing of the movement of goods and services across borders. Trade finance products include letters of credit, guarantees, documentary collections, open account, and supply chain finance. Trade finance transactions are exposed to various risks, such as credit risk, operational risk, fraud risk, and money laundering risk. Money laundering risk refers to the possibility that trade finance transactions are used to conceal the origin, ownership, or destination of illicit funds, or to evade taxes, sanctions, or exchange controls. Trade-based money laundering (TBML) is a form of money laundering that involves the manipulation of trade transactions, such as mispricing, misinvoicing, over- or under-shipping, or falsifying documents, to transfer value or obscure the true nature of the funds. An analyst reviewing trade finance transactions should be alert to any red flags or indicators of potential TBML, such as significant discrepancies between the value or quantity of the goods and the invoice, payment, or contract; unusual or complex shipment routes or methods; involvement of high- risk jurisdictions, entities, or commodities; or lack of transparency or documentation of the trade transaction. If the analyst notices an increase in price of 25% over 12 months for commodities with the same specification and quantity, this could be a sign of mispricing, which is a common technique of TBML.

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