Financial Crime Prevention: Sanctions, Fraud, and Control Design
Beyond money laundering
Financial crime prevention covers sanctions and export controls, fraud (including trade and documentary fraud), bribery and corruption, and terrorist financing. TBML questions frequently overlap with sanctions: a transaction can be legitimate trade and still be prohibited because a party, vessel, port, or good is sanctioned.
Sanctions screening in trade
Know the difference between name screening (parties) and transaction/geo screening (ports, vessels, countries, goods). Ownership and control screening matters: a company not itself listed may be caught because a sanctioned person owns or controls it. Dual-use goods and proliferation-sensitive items require end-use scrutiny.
Fraud and documentary risk
Common documentary frauds include forged bills of lading, duplicate financing of the same shipment, and back-to-back letters of credit used to inflate value. Red flags include documents that are internally inconsistent (weights, ports, dates), shipments routed through unrelated jurisdictions, and goods that do not match the customer's stated business.
Control design
Effective programmes combine policies, risk assessment, screening, escalation, training, and independent testing. A control that exists on paper but is not operated is a design versus operating effectiveness gap - a favourite exam distinction.
Traps
- Treating sanctions screening as a one-time onboarding step rather than ongoing.
- Assuming a clean sanctions result means the transaction is permissible - fraud and TBML risk remain.
- Confusing ownership with control; both can trigger a sanctions match.
Rule of thumb
Run the four-way check: parties, vessel/route, goods, and payment path. Any one failing is a stop-and-escalate.
Worked example: A letter of credit names clean parties, but the vessel has a history of disabling its AIS and the route transships through a sanctioned port. The parties pass screening; the transaction still fails the four-way check.