Britain’s financial regulators said that trade finance firms must do more to identify potentially suspicious activities. This can be done by undertaking additional risk assessments. Several high-profile failures of commodity and trade finance firms, took place in the past 18 months. The Bank of England and Financial Conduct Authority reported this in a letter to the chief executives of trade finance firms.
Greensill Capital, a trade finance company had collapsed this year. Their recent assessments of individual firms have highlighted several significant issues, that relates to both credit risk analysis and financial crime controls. The letter also added that these issues have exposed firms to unnecessary risks which are material in both a conduct and prudential context. Reviews of firms have found insufficient focus on the identification and assessment of financial crime risk factors. This includes risk of dual-use goods or the potential for fraud. Dual-use products refers to goods such as technology and software, in both military and civil purposes.
The regulators stated that they have seen examples of failing conducting these checks, leading to exposure to suspicious activity. As a firm that undertakes trade finance activity, they should undertake a holistic assessment of the associated financial crime risks. They may ask to see the assessment and any follow-up action that has been taken.