The Wolfsberg Group, ICC and BAFT Trade Finance Principles

No. Free0013

ISBN : Free0013

The Wolfsberg Group, ICC and BAFT Trade Finance Principles outline the standards for the control of financial crime risks (FCRs) associated with Trade Finance activities. Last updated in 2017, this updated edition adds guidance on the specific application of controls by banks in the context of open account trade transactions. More specifically, they elaborate on receivables purchase techniques, as defined by the Global Supply Chain Finance Forum. They also provide recommendations on the application of controls by banks in the context of financial institutions trade loans (FITL), also known as bank-to-bank trade loans.

Since the publication of the joint 2017 Wolfsberg Group, ICC and BAFT Trade Finance Principles, much has happened in the way of discussion and cooperation between various industry groups in the space of financial crime related to trade finance.

This updated edition has been expanded to offer more detail around what is meant by various risk mitigation activities; describes the challenges and limitations they face; and recommends actions that law enforcement, customs and other government agencies and policymakers need to address to help the financial services industry meet its obligations under financial crimes compliance frameworks.

In order to strengthen the description of the control and escalation framework that banks need to have in place in order to meet the core principles paper’s guidance, the former appendices V, VI and VII on Control, Escalation and the Glossary, have been incorporated as sections two, three and four of the new paper.

It is strongly recommended that practitioners also refer to the other Wolfsberg Group papers in respect of customer due diligence (CDD); correspondent banking; the use of SWIFT RMAs; and the risk based approach (RBA), all of which reflect the requirements of regulators and the “International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation”, known as the FATF 40 Recommendations. These principles apply to all banks regardless of size and do not require banks to have significant electronic systems in place to apply them. These principles are the basis of what was always considered to be “Good Banking Practice.”

Code ISBN : Free0013
Number of pages : 83
Publishing date : 2019-01-02
Language : English

Foreword to the 2019 amendment

2011 to 2017

Trade Finance Principles

1. Core

1.1 Introduction

2. Parties in Trade Transactions

3. Financial Crime Risks

4. National and Regional Sanctions, Embargoes and NPWMD

5. Challenges

6. Recommendations

2. Control Mechanisms

1. Introduction

2. Customer Due Diligence

3. Name Screening

4. Activity Based Financial Sanctions

5. Export Controls

6. Limitations

3. Escalation Procedures.

1. Introduction

2. Three Lines of Defence

3. Application 

4. Glossary

1. Terms

Appendix I: Documentary Credits

Appendix II: Bills for Collection

Appendix III: Guarantees and Standby Letters of Credit

Appendix IV: Open Account

Appendix V: FI Trade Loans

Prepared by Wolfsberg Group, International Chamber of Commerce (ICC) and BAFT