Financial crime risk controls – Price checking of goods and services in trade transactions

ICC recognises the challenges faced by financial institutions in identifying and mitigating risks associated with financial crime, such as money laundering typologies involving the misuse of trade finance to disguise fund transfers through price misrepresentation.

These risks require robust controls and identification methods. In line with regulatory emphasis on appropriate measures, ICC aims to provide an updated discussion on implementing controls related to price misrepresentation risks in trade finance as well as addressing the plausibility of price checking in trade finance.

This ICC paper explores the prevalent industry-wide approach to price checking, assesses the feasibility of potential controls, and summarises best practices and recommendations tailored to financial institutions engaged in trade finance. It is important to note that this discussion aligns with the ICC’s comprehensive analysis on dual-use goods in trade finance, offering a holistic perspective on risk management and controls in the financial services industry.

Key points:

1. Understanding the risk: We delve into the existing body of discussion and guidance literature on the misuse of trade finance for money laundering and emphasise the need for financial institutions to be aware of the risk.
2. Feasibility of price checking controls: Our guidance paper assesses the feasibility and effectiveness of various price checking controls, including the use of vessel tracking and independent document verification, to enhance the detection of price misrepresentation.
3. Best practices and recommendations: Recognising the individual circumstances of financial institutions, we summarise best practices and provide recommendations tailored to trade finance activities. We emphasise that there is no one-size-fits-all solution and encourage financial institutions to adopt approaches that align with their specific needs.

ICC is committed to supporting financial institutions in addressing the challenges associated with price misrepresentation risk in trade finance. This paper and its insights can help you navigate this complex landscape and implement effective controls.

The chair of the ICC Financial Crimes and Risks policy taskforce James Yates, HSBC wanted to point out that   

“The launch of the Price checking paper provides updated guidance on processes linked to the misuse of trade finance to disguise the transfer of funds and how to better control, detect them and develop efficient processes. This release is a good representation of the collaboration across the banking industry to fight financial crime and maintain resilience and confidence in the international banking system.”