1 PUBLIC 1 Trade Finance Principles The Wolfsberg Group, ICC and BAFT Trade Finance Principles 2019 amendment PUBLIC 2 Trade Finance Principles 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.
2 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. Thi s document was prepared for general i nformati on purpos es onl y, does not purport to be comprehens i ve and i s not i ntended as l egal advi ce.
3 The opi ni ons expres s ed are s ubj ect to change wi thout noti ce and any rel i ance upon i nformati on contai ned i n the document i s s ol el y and excl usivel y at your own ri sk. The publ i s hi ng organis ations and the contri butors are not engaged i n renderi ng l egal or other expert profes s i onal s ervices for whi ch outs ide competent profes s i onals s hould be s ought. PUBLIC 3 Trade Finance Principles Contents Foreword to the 2019 2011 to 2017 ..5 Trade Finance Principl es ..8 1. Introducti 2. Parti es in Trade Transacti ons .. 11 3. Financial Cri me Ris ks.
4 11 4. National and Regi onal Sancti ons , Embargoes and NPWMD .. 14 5. Chall 16 6. Recommendati ons .. 17 2. Control Mechanisms .. 18 1. Introducti on .. 18 2. Cus tomer Due Dili gence .. 18 3. Name Screeni ng .. 19 4. Activi ty Bas ed Financial Sancti ons .. 19 5. Export 20 6. Li mi tati ons .. 21 3. Escalation Procedures .. 22 1. Introducti on .. 22 2. Three Li nes of Defence .. 22 3. Applicati on .. 23 4. Glossary .. 24 1. Terms .. 24 Appendix I: Documentary Credi ts .. 33 Appendix II: Bills for Coll 47 Appendix III: Guarantees and Standby Letters of Credi t .. 59 Appendix IV: Open Account.
5 69 Appendix V: FI Trade 80 PUBLIC 4 Trade Finance Principles Foreword to the 2019 amendment Si nce the publ i cati on of the j oi nt 2017 Wol fs berg Group, ICC and BAFT Trade Fi nance Pri nci ples paper and appendi ces much has happened i n the way of di s cus si on and cooperation between vari ous i ndus try groups i n the s pace of fi nanci al crime rel ated to Trade Fi nance. The frui tful cooperati on between the abovementi oned three groups has conti nued and l ed to the paper you now have before you, whi ch i ncorporates two new appendi ces ; one on the s ubj ect of Bank to Bank Trade l oans (al s o known as FI Trade Loans ) and one on Open Account Trade Fi nance.
6 BAFT publ i s hed thei r paper on Trade cal l ed Combati ng Trade Bas ed Money Launderi ng: Rethi nki ng the Approach i n Augus t 2017 and i n March 2018 the Wol fsberg Group, with the s upport of the ICC and BAFT, l aunched a s hort awareness vi deo focussed on Trade -Based Money Laundering1. And fi nally, i n Si ngapore, the ACIP Public-Private Partnership between the Monetary Authority of Singapore (MAS), the Commerci al Affairs Department of the Si ngapore Police Force (CAD), Si ngapore Customs and s everal l ocal and i nternational banks published two gui dance papers i n May 2018 on TBML and Legal Persons2. It i s encouragi ng to s ee that the focus on preventi ng and i denti fyi ng money l aunderi ng acti vity i n gl obal Trade has not onl y i ncreas ed over the pas t few years , but that i t has s hi fted away from rel yi ng s ol el y on the preventati ve meas ures from banks and that thi s i s l eadi ng to more cooperati on between regul ators , l aw enforcement and banks (ei ther di rectl y or vi a i ndus try groups ).
7 As the chai r of the Worki ng Group, I woul d l i ke to thank i ts members and s upport s taff for thei r hard work, as wel l as the Wol fs berg Group Secretari at, the ICC Banki ng Commi s s i on and BAFT for thei r s upport. Willem Toren 1 Wolfsberg Trade Based Money Laundering awareness video 2 ring- Trade -based-mo ney-launde PUBLIC 5 Trade Finance Principles 2011 to 2017 The Wol fs berg Group Trade Fi nance Pri nciples paper and appendices were l as t updated i n 2011. Si nce then regul atory expectati ons and a more s tri ngent appl i cati on of exi s ti ng regul ati ons have made i t neces s ary to revi ew the paper, i denti fy where expectati ons have changed and, therefore, where the bas i c pri nciples or thei r appl i cation need to be readdres s ed.
8 Si nce 2011, the Wol fs berg Group has had an i ncreas ingl y cl ose di al ogue wi th the ICC to s ee how the pri nci pl es could be better di s s emi nated to the ICC membershi p wi th a vi ew to rai s ing and s tandardi sing the practi ce l evel of Fi nancial Cri me Compl i ance (FCC) wi thi n the Trade Fi nance i ndus try. At that ti me, the onl y other publ i cl y available gui dance, whi ch was s peci fic to the Uni ted States , was the January 2008 BAFT IFSA Guidelines for Bank Secrecy Act/Anti-Money Laundering for Trade Services 3 and a s ubs equent March 2015 BAFT global update entitled Guidance for Identifying Potentially Suspicious Activity in Letters of Credit and Documentary Collections.
9 4 In di s cus s ion wi th many practi ti oners at ICC Banki ng Commi s s ion meeti ngs and other i ndus try events , i t became cl ear that many banks saw the Wolfsberg Principles paper as being for large global banks and not for our smaller, local banks. There was also the vi ew that i f the ICC i s s ued a gui dance paper or offi ci al publ icati on, then many more banks woul d s ee i t as i mportant to fol l ow that gui dance. Thi s l ed to the formati on of the j oi nt ICC-Wol fs berg Group Trade Fi nance Pri nci ples Drafting Group i n Apri l 2014, with a remi t to redraft and update the Wol fs berg Trade Fi nance Pri nciples paper i n the s tyl e of ICC gui dance, wi th members drawn from Wol fs berg Group banks , ICC members gl obal l y, as wel l as BAFT s o as to broaden the gl obal pers pective as part of the drafti ng group.
10 It i s i mportant to note that the core pri nci pl es have not changed, nor have the res pons i biliti es of the banks i nvol ved i n Trade trans acti ons to have a good knowl edge of thei r cus tomer or i ns tructi ng party, the bus i nes s that they conduct and wi th whom and where they are s i tuated. Nei ther has the requi rement for banks to fol l ow s tri ctl y the regul ations ai med at detecti ng and preventi ng Money Launderi ng, Fi nanci ng of Terrori s ts or Terrori s t Organi s ati ons, commi tting or as s i sti ng i n Bri bery and Corrupti on, evadi ng tax l i abi liti es , the prol i ferati on of weapons of mas s des tructi on and other fi nanci al cri mes , or the evadi ng or breaki ng of s ancti ons i mpos ed on countri es or i ndi vi duals by competent authori ti es changed.