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FATF and Egmont Report on Trade Based Money Laundering

07/04/2021

The above published a joint report at the end of 2020 and supplemented this with a further document last month. Details are as follows:

In December 2020, a report on trade-based money laundering that provides a detailed insight into emerging risks, and outlines a number of best practices for authorities to mitigate this threat. (https://www.fatf-gafi.org/publications/methodsandtrends/documents/trade-based-money-laundering-trends-and-developments.html for more information)

In March 2021, this report was further supplemented with a list of risk indicators intended to help private sector companies detect trade-based money laundering. (https://www.fatf-gafi.org/publications/methodsandtrends/documents/trade-based-money-laundering-indicators.html for more information)

The FATF also held a webinar last month to discuss the most recent trade-based money laundering trends and developments. A link to a recording is given below (it runs for approx. 100 minutes).

https://www.youtube.com/watch?v=ZEhuJP4hrG0&t=15s

 


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We, as the issuing bank, requested the below document, under field 46A. “Insurance policy/certificate for 10.00 percent above CIF value payable to the order of Sampath bank PLC, covering institute cargo clauses (a), institute war clauses (cargo), institute strike clauses (cargo), transshipment risks marked premium paid claims payable in Colombo irrespective of percentage.” Insurance certificate is presented containing below wording on the face side of the document. “The settlement of loss and damage will be effected, unless otherwise provided, through the intermediary of Marsh SA/NV to whom all documents are to be forwarded for this purpose, and will collect the indemnity under deduction of a commission of one percent” Also, it indicates the LC conditions as a mirror image as follows under the heading of "letter of credit conditions" whereas insurance conditions are incorporated separately in the certificate: "covering institute cargo clauses (A), institute war clauses (cargo), institute strike clauses (cargo), transshipment risks marked premium paid claims payable in Colombo irrespective of percentage" Having considered the above clauses, we have quoted below discrepancies. 1) Insurance policy indicates a deductible of 1 pct instead of irrespective of percentage. 2) Insurance not marked premium paid Beneficiary’s bank disagrees with our discrepancy and raised below argument: “Insurance policy/certificate does not indicate a deductible of 1 pct irrespective of percentage on the face of the document and banks will not examine terms and condition in insurance document as per ISBP paragraph K22 and marked as premium paid under the LC conditions. Considering above, may we have your opinion on the discrepancy quoted by us and the counter argument raised by the beneficiary’s bank.