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UK regulators tell trade finance firms to step up crime controls

By Reuters

By Huw Jones

LONDON -Britain’s financial regulators said on Thursday that trade finance firms must do more to identify potentially suspicious activities by undertaking additional risk assessments.

During the past 18 months there have been several high-profile failures of commodity and trade finance firms with significant losses, the Bank of England and Financial Conduct Authority said in a letter to the chief executives of trade finance firms they regulate.

Greensill Capital, a trade finance company, collapsed this year, highlighting risks in the $1.3 trillion supply chain finance business.

“Our recent assessments of individual firms have highlighted several significant issues relating to both credit risk analysis and financial crime controls,” the letter said.

“These issues have exposed firms to unnecessary risks that are material in both a conduct and prudential context,” it said.

Reviews of firms have found insufficient focus on the identification and assessment of financial crime risk factors, such as the risk of “dual-use” goods or the potential for fraud, the letter said.

Dual-use products typically refer to goods such as technology and software that can be used for both military and civil purposes.

“We have seen examples of how failing to conduct these checks can lead to exposure to suspicious activity,” the regulators said.

“As a firm that undertakes trade finance activity, you should, if you have not already, undertake a holistic assessment of the associated financial crime risks.”

The regulators said they may ask to see the assessment and any follow-up action taken.