Red Flags in Trade Transactions: A Call for Banks to Be Vigilant
Lack of Proper Transport Documents or Evidence of Shipment Raises Concerns
Recent observations have revealed that some trade transactions are being conducted without the required transport documents or evidence of shipment. This raises concerns about the legitimacy and authenticity of these deals.
What Are the Red Flags?
Mismatched Invoice Values
- A mismatch between the invoice value (freight charge) and fair market price
- Over-invoicing: goods or services invoiced at a price above the fair market price
- Under-invoicing: goods or services invoiced at a price below the fair market price
- Fictitious trade: no goods shipped, but rather collusive arrangements to create fake documents
What Should Banks Look Out For?
When reviewing transactions suspected of being fraudulent, banks should pay attention to the following:
- Product Taxonomy
- Category and description
- Goods Details
- Category of goods
- Goods description
- Pricing Information
- Unit price of goods
- Quantity of goods
- Market price of goods
- Transaction Details
- Transaction date
- Amount of the transaction
- Invoice Information
- Invoice number
- Other banks’ account information recorded in the invoice
Why Is This Important?
Detecting and preventing fraudulent trade transactions is crucial to maintaining the integrity of the financial system. By being aware of these red flags, banks can take proactive measures to prevent and detect fraudulent activities, ultimately protecting their customers and the global economy.
What Can Banks Do to Prevent Fraud?
Proactive Measures
- Implement robust due diligence procedures
- Verify transaction details and documentation
- Monitor transactions for suspicious activity
- Report any concerns to relevant authorities
- Collaborate with other financial institutions to share information and best practices
By being vigilant and proactive, banks can help prevent fraudulent trade transactions and ensure the integrity of the global financial system.