Trade finance provides a crucial avenue for global commerce but is also a target for money launderers, bribery activities, and sanctions evasion. Criminals exploit trade finance mechanisms by falsifying the price, quality, or existence of goods to disguise illicit transactions. Regulators, including the Financial Conduct Authority (FCA) and the Wolfsberg Group, have called for enhanced trade finance controls to mitigate financial crime risks. Institutions that fail to implement effective screening mechanisms face severe financial penalties and reputational damage.

Our Client

Our client operates a sophisticated trade finance function that supports a wide range of corporate and institutional clients engaged in cross-border transactions. Their trade finance division is structured to facilitate international trade by providing risk mitigation, liquidity solutions, and transactional support. They offer supply chain finance solutions, structured trade finance, and export credit facilities, enabling businesses to manage cash flows effectively while reducing financial exposure. With an average monthly processing volume of 40,000 trade transactions, our client must maintain strict compliance with international sanctions regulations to mitigate financial crime risks.

The trade finance function also integrates advanced compliance mechanisms, including automated transaction monitoring, Know Your Customer (KYC) due diligence, and real-time sanctions screening to prevent illicit financial activities.

The Challenge

Trade finance is inherently complex, involving multiple parties across various jurisdictions. As a result, financial institutions engaged in trade finance must navigate differing sanctions regulations and ensure robust compliance mechanisms. Violations of trade embargoes and sanctions can result in severe penalties, including hefty fines and criminal liability.

To manage sanctions risk, our client had implemented a global systemic sanction screening solution integrated with its core trade system. However, given the dynamic nature of trade transactions -where counterparties and transaction details evolve - ensuring real-time and effective sanctions screening remained a challenge. The client sought an independent assessment of its trade finance sanctions screening processes to verify alignment with global sanctions policies and evaluate control effectiveness.

Our Approach

Leveraging our bespoke financial crime audit methodology, we developed a tailored sanctions control framework for our client’s UK trade finance operations. This comprehensive framework allowed us to assess the effectiveness of our client’s key controls in managing financial crime risks. Our approach encompassed:

• Review of Global Sanctions Policy: We conducted a thorough review of our client’s global sanctions policy, ensuring it aligned with the latest regulatory requirements. We assessed how well the global trade finance procedures were implemented in practice and whether they were aligned with the overarching policy.

• Forensic Analysis of the Sanctions Screening Process: We undertook a forensic analysis of the sanctions screening process, focusing on four key areas: transaction identification, independent alert investigation, analysis of historic alert investigations, and comparison of independent and historic investigations. Our review aimed to identify inconsistencies and assess the overall effectiveness of the screening mechanism.

• Independent Alert Review & Investigation: Utilising our alert management methodology and specialist review tool, we independently assessed sanctions alerts generated by the system. We classified them as false positives, true hits, or requiring further scrutiny and provided justifications for each determination. This helped refine screening parameters and improve overall efficiency.

• Procedural Adherence & Escalation Review: We examined whether sanctions screening analysts followed established escalation protocols, sought additional information where necessary, and adhered to regulatory expectations. In cases where transactions failed sanctions screening, we analysed how analysts responded, identified trends in sanctions alert handling, and assessed the consistency of decision-making across teams.

Key Benefits & Measurable Outcomes

Following our assessment, our client gained enhanced confidence in its trade operations sanctions screening controls, ensuring alignment with regulatory expectations and internal policies. The key outcomes included:

• Strengthened Sanctions Compliance: Independent validation confirmed the effectiveness of sanctions controls, reducing the risk of regulatory breaches.

  
  

• Enhanced Senior Management Oversight: Improved visibility over the sanctions screening process allowed key stakeholders to make informed compliance decisions.

  
  

• Refined Alert Management Processes: Insights from our forensic analysis enabled the client to fine-tune screening parameters, reducing false positives and improving efficiency.

  
  

• Improved Staff Adherence to Protocols: Identification of procedural inconsistencies led to targeted training initiatives, reinforcing compliance culture.

Our independent review empowered our client with the insights needed to enhance operational resilience and safeguard against financial crime risks.

Strengthen Your Sanctions Compliance Today

Are your trade finance operations compliant with evolving sanctions regulations? Contact us today for an independent assessment of your sanctions screening controls.