Trade Based Customer Awareness on AML/CFT

In today’s day and age, it is necessary for businesses to be aware of the financial crimes taking place in our environment and what can be done to minimize the risk. You need to create a safe and risk-free environment so you can conduct business with peace of mind. Following are some basics to help you understand financial crime & what can be done by you to avoid being a victim of Financial Crime.

What is Financial Crime?

Financial crimes, including tax evasion, money laundering, and terrorist financing undermine political and economic interest and pose a serious threat to national security. Be aware of financial risks in your environment, conduct business in a safe manner.

Money Laundering:

The process of concealing or disguising the existence, source, movement, destination or use of illicitly derived funds to make them appear legitimate. Business includes Illicit Trafficking in Narcotic Drugs, Corruption and Bribery, Smuggling, Cash Smuggling, Tax Crimes, Illegal MVTS, Terrorism/TF, Organized Crime, Human Trafficking, Arm Trafficking, Robbery, Market Manipulation, Cybercrime, Fraud and forgery, Kidnapping, Extortion, Sexual Exploitation, Trafficking of Good, Counterfeiting Currency, Piracy of Products, Murder, Environmental Crime and Marine Piracy.

Terrorist Financing:

The act of unlawfully and willingly providing or collecting funds with the intention that they should be used or, in the knowledge that they are to be used, in support of an act of terrorism.

Social and Religious Norms:

The concept of person to person charity, khairat, sadqa, zakat or helping orphans / widows or religious organization serving Islam stems from Pakistan socio-economic and religious culture. Donations are a principle source of funding for all NPOs in Pakistan, however, be careful while donating to NPOs, where utilization is not clear.

Trade Based Money Laundering:

Trade Based Money Laundering takes place in domestic as well as international trade & is subject to a wide range of risks and vulnerabilities that can be exploited by criminal organizations and terrorist financiers. Trade based money laundering techniques vary and are frequently used in combination with other money laundering techniques to further obscure the money trail. It may be through the misrepresentation of price, quantity or quality of imports or exports.

Main Methods:

Under / Over Invoicing – misrepresenting the price of the goods in the invoice and other documentation. This enables the buyer/seller to gain excess value as a result of payment.
Multiple Invoicing – Issuing more than one invoice for the same goods enables the seller to justify the receipt of multiple payments.
Over / Under Shipping – In the first case the exporter transfers greater value to the importer; in the second the importer transfers greater value to the exporter.
Deliberate misrepresentation of the description of goods – may structure the transaction in a way to avoid alerting suspicion to financial institutions or to third parties which become involved.
Phantom Shipping – no goods are shipped and all documentation is completely falsified.
Complex and fragmented transactions – Financial Institutions may only be involved in part of the overall transaction, where intermediaries act as applicants or beneficiaries.
Use of commodities as payment for goods and services – Commodities such as diamonds, gold or oil can be exchanged as a form of payment for another underlying transaction which the Bank may not have visibility of.

If you think that trade based money laundering is taking place, please inform the Bank immediately.

Trade Based Customer Awareness on AML/CFT