The perception of money laundering risk in bank's documentary letters of credit

Menz, Mario (2015) The perception of money laundering risk in bank's documentary letters of credit. MSc dissertation, University of Portsmouth.

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    Abstract

    The perception and mitigation of financial crime risk in bank’s documentary letters of credit has been a topic of interest for supranational bodies and national financial services regulators for some time (APG, 2012). The Financial Conduct Authority (‘FCA’), the United Kingdom’s (‘UK’) financial serves regulator has carried out a thematic review of Banks’ control of financial crime risks in trade finance in July 201. It visited four major UK banks, five global wholesale and investment banks and eight smaller overseas banks based in London, and has found that half of the banks it visited as part of the review had no consistent approach in assessing, evaluating or mitigating the financial crime risk associated with letters of credit. It further found that staff in financial services’ legal and compliance positions lack an understanding of the financial crime risk associated with letters of credit, and that in its opinion many financial institutions’ fraud management and fraud mitigation frameworks require improvement to counter letters of credit fraud.
    The FCA’s opinion at the time incurred criticism from the Association of Foreign Banks (‘AFB’), which indicated in its response to the FCA that regulatory expectations should be focused on proportionality and workability. What both the FCA and the AFB agree on is that there is a lack of understanding how documentary letters of credit transactions are structured, and what the actual money laundering risks in letters of credit transactions are.
    The AFB’s response to the FCA’s thematic review challenged the regulator’s perception that documentary credit transactions pose a high risk area for money laundering, and has questioned whether there really is clear evidence to support the regulator’s assertion. This research seeks to analyse the following three points:

    1. Are regulatory expectations based on the financial services regulator’s perception of fraud risk associated with international letters of credit transactions, or money laundering risk?

    2. What is the general perception of money laundering in letters of credit transactions by trade finance practitioners?

    3. To what extend is the financial services regulator’s perception of money laundering risk in international letters of credit transactions different to the perception of trade finance practitioners?

    Item Type: Dissertation
    Departments/Research Groups: Faculty of Humanities and Social Sciences > Institute of Criminal Justice Studies
    Depositing User: Jane Polwin
    Date Deposited: 22 Feb 2016 11:35
    Last Modified: 22 Feb 2016 11:35
    URI: http://eprints.port.ac.uk/id/eprint/19849

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