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Wolfsberg Group Trade Finance Principles 2019

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Wolfsberg Group Trade Finance Principles 2019 Trade Finance Principles 1 The Wolfsberg Group, ICC and BAFT Trade Finance Principles 2019 amendment PUBLIC Trade Finance Principles 2 Copyright © 2019, Wolfsberg Group, International Chamber of Commerce (ICC) and BAFT Wolfsberg Group, ICC and BAFT hold all copyright and other intellectual property rights in this collective work and encourage its reproduction and dissemination subject to the following: Wolfsberg Group, ICC and BAFT must be cited as the source and copyright holder mentioning the title of the document and the publication year if available. Express written permission must be obtained for any modification, adaptation or translation, for any commercial use and for use in any manner that implies that another organization or person is the source of, or is associated with, the work. The work may not be reproduced or made available on websites except through a link to the relevant Wolfsberg Group, ICC and/or BAFT web page (not to the document itself). Permission can be requested from the Wolfsberg Group, ICC or BAFT. This document was prepared for general information purposes only, does not purport to be comprehensive and is not intended as legal advice. The opinions expressed are subject to change without notice and any reliance upon information contained in the document is solely and exclusively at your own risk. The publishing organisations and the contributors are not engaged in rendering legal or other expert professional services for which outside competent professionals should be sought. PUBLIC Trade Finance Principles 3 Contents Foreword to the 2019 amendment.....................................................................................................................................................4 2011 to 2017 .........................................................................................................................................................................................5 Trade Finance Principles ......................................................................................................................................................................8 1. Core...........................................................................................................................................................................................8 1.1 Introduction............................................................................................................................................................................8 2. Parties in Trade Transactions ............................................................................................................................................ 11 3. Financial Crime Risks .......................................................................................................................................................... 11 4. National and Regional Sanctions, Embargoes and NPWMD ........................................................................................... 14 5. Challenges........................................................................................................................................................................... 16 6. Recommendations ............................................................................................................................................................. 17 2. Control Mechanisms ................................................................................................................................................................ 18 1. Introduction ......................................................................................................................................................................... 18 2. Customer Due Diligence ..................................................................................................................................................... 18 3. Name Screening .................................................................................................................................................................. 19 4. Activity Based Financial Sanctions ..................................................................................................................................... 19 5. Export Controls.................................................................................................................................................................... 20 6. Limitations ........................................................................................................................................................................... 21 3. Escalation Procedures .............................................................................................................................................................. 22 1. Introduction ......................................................................................................................................................................... 22 2. Three Lines of Defence ...................................................................................................................................................... 22 3. Application .......................................................................................................................................................................... 23 4. Glossary ..................................................................................................................................................................................... 24 1. Terms ................................................................................................................................................................................... 24 Appendix I: Documentary Credits .................................................................................................................................................... 33 Appendix II: Bills for Collection......................................................................................................................................................... 47 Appendix III: Guarantees and Standby Letters of Credit ................................................................................................................ 59 Appendix IV: Open Account .............................................................................................................................................................. 69 Appendix V: FI Trade Loans............................................................................................................................................................... 80 PUBLIC Trade Finance Principles 4 Foreword to the 2019 amendment Since the publication of the joint 2017 Wolfsberg Group, ICC and BAFT Trade Finance Principles paper and appendices much has happened in the way of discussion and cooperation between various industry groups in the space of financial crime related to Trade Finance. The fruitful cooperation between the abovementioned three groups has continued and led to the paper you now have before you, which incorporates two new appendices; one on the subject of Bank to Bank Trade loans (also known as FI Trade Loans) and one on Open Account Trade Finance. BAFT published their paper on Trade called Combating Trade Based Money Laundering: Rethinking the Approach in August 2017 and in March 2018 the Wolfsberg Group, with the support of the ICC and BAFT, launched a short awareness video focussed on Trade-Based Money Laundering1. And finally, in Singapore, the ACIP Public-Private Partnership between the Monetary Authority of Singapore (MAS), the Commercial Affairs Department of the Singapore Police Force (CAD), Singapore Customs and several local and international banks published two guidance papers in May 2018 on TBML and Legal Persons2. It is encouraging to see that the focus on preventing and identifying money laundering activity in global trade has not only increased over the past few years, but that it has shifted away from relying solely on the preventative measures from banks and that this is leading to more cooperation between regulators, law enforcement and banks (either directly or via industry groups). As the chair of the Working Group, I would like to thank its members and support staff for their hard work, as well as the Wolfsberg Group Secretariat, the ICC Banking Commission and BAFT for their support. Willem Toren 1 Wolfsberg Trade Based Money Laundering awareness video 2 https://abs.org.sg/docs/library/best-practices-for-countering-trade-based-money-laundering.pdf https://abs.org.sg/docs/library/legal-persons-misuse-typologies-and-best-practice.pdf PUBLIC Trade Finance Principles 5 2011 to 2017 The Wolfsberg Group Trade Finance Principles paper and appendices were last updated in 2011. Since then regulatory expectations and a more stringent application of existing regulations have made it necessary to review the paper, identify where expectations have changed and, therefore, where the basic principles or their application need to be readdressed. Since 2011, the Wolfsberg Group has had an increasingly close dialogue with the ICC to see how the principles could be better disseminated to the ICC membership with a view to raising and standardising the practice level of Financial Crime Compliance (FCC) within the Trade Finance industry. At that time, the only other publicly available guidance, which was specific to the United States, was
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