The document discusses trade-based money laundering (TBML) and the regulatory framework in Bangladesh to combat it. It notes that the Financial Action Task Force recognized TBML as a major method for criminal groups to launder money. It then summarizes that an estimate found nearly $50 billion was siphoned out of Bangladesh via TBML from 2005-2015, according to Global Financial Integrity. The document outlines various TBML risks and red flags that banks like Sonali Bank should be aware of to help prevent TBML and illicit financial outflows.

3. Criminals change their strategy off and
on to divert attention of law
enforcement agencies.
Trade based money laundering drew attention of global
bodies not long ago. Only in 2006 the Financial Action Task
Force (FATF) recognized trade based money laundering as
one of the major methods by which criminal organizations
and terrorist financiers move money for the purpose of
disguising its origins and integrating it back into the formal
economy.
• Like many countries
Bangladesh is also affected
by trade based money
laundering and ensuing
illicit outflow.

5. 1. The Global Financial Integrity (GFI) estimated that from 2005 to
2015 within 10 years 7.8 trillion USD siphoned off from
underdeveloped or developing countries to the developed
world with a 6.5% increasing rate each year.
2.The same estimate shows that from Bangladesh almost 55 billion
USD siphoned off in different ways, among them 83% by means of
trade.10% return to the home as loan/grant
This means almost 50 billion USD siphoned off from Bangladesh
from 2005 to 2015 via trade-based money laundering (TBML).
Financial Action Task Force (FATF) recognized trade-based money laundering as
one of the major methods by which criminal organizations and terrorist
financiers move money for the purpose of disguising its origins and integrating it
back into the formal economy.

6. Bangladesh Financial
Intelligence Unit (BFIU) has
issued a standard Guideline
for Banks on TBML.
As the TBML is a curse for our
nation and barrier for the national
development, the Sonali Bank
Limited will put its best efforts by
all means to curb TBML.
Therefore, the Sonali Bank
Limited has prepared a Policy
named as “Sonali Bank TBML
Prevention Policy”

8. Trade Payment Methods
• Cash in Advance
• Open Account
• Documentary Collection
• Documentary Credit [LC]

9. Cash in Advance
• Advance Payment
• Interest of Exporter is Protected
• Interest of Importer is Not Protected
• Involvement of Bank is Insignificant

10. Open Account
• Suppliers Credit
• Interest of Importer is Protected
• Interest of Exporter is Not Protected
• Involvement of Bank is Insignificant

11. Documentary Collection
• Interest of Importer is Protected.
• Interest of Exporter is better Protected than Open
Account.
• Greater Involvement of Bank than Cash in Advance
and Open Account.

12. Documentary Credit
• Interest of Importer is Protected
• Interest of Exporter is Protected
• Involvement of Bank is significant

14. 14
Mechanism of Documentary Credit
CONTRACT
DOCS
GOODS
DOCS
GOODS
EXPORTER
IMPORTER
DOCUMENTS
DOCUMENTS
PAYMENT
PAYMENT
Letter of
Credit
Negotiating Bank/
Confirming Bank
Reimbursing Bank
Advising bank

15. Regulatory Framework in Combating TBML in
Bangladesh
• Money Laundering Prevention Act, 2012: As per section 2 (v)
(ii) of Money Laundering Prevention Act, 2012 smuggling of
money or property is money laundering while section 2 (a) of the
Act defines “smuggling of money or property” as
i) transfer or holding money or property outside the country in breach
of the existing laws in the country; or
ii) refrain from repatriating money or property from abroad in which
Bangladesh has an interest and was due to be repatriated; or
iii) not bringing into the country the actual dues from a foreign country,
or paying to foreign country in excess of the actual dues;

16. Import Policy Order 2015-2018: Chapter 2
“General Provisions for Import”, Section 5(4)
“Import at competitive rate”:
a) Import shall be made at the most competitive rate and it is
obligatory for the importers, at any time, to submit documents
to Import Control Authority regarding the price paid or to be
paid by them;
b) in case of import under Untied Commodity Aid in the
private sector, goods shall be imported at the most competitive
rate by obtaining quotations from at least three suppliers

17. or indentors representing at least two source
countries: Provided that this condition shall not
apply for opening LC up to Tk. one lac; and
c) for import at the most competitive rate by the
public sector importers, quotations have to be
invited before opening letter of credit, and goods
shall be imported at the most competitive price.

18. • Guidelines for foreign Exchange
transactions (GFET), 2018: volume-1
• Chapter 7, Para 20: “Verification of import price etc.”:
• “Before opening of LC or issuing LCAF, the AD shall have to take
usual and reasonable cautionary measures to ensure that both the
exporter and importer are bonafide business person of the goods
concerned, the exporting country is the usual exporter of the goods
concerned and the price of the goods concerned is competitive in
terms of prevailing price in the international market on the date of
contract and/or similar imports in contemporary period.
• ADs are advised to verify the above, if needed, with the help of
concerned Bangladesh Mission abroad.”

19. Chapter 8, Para 7 “Certification of EXP forms
by ADs”
• :
• (b) In order to avoid any loss of foreign exchange to the country, ADs shall not certify
any EXP form unless they have satisfied themselves with regard to the followings: (iv)
Bonafides of the buyers/consignees abroad and their credentials etc. where necessary,
ADs should make discreet enquiries in this regard through their correspondents abroad
etc., greater care should be taken particularly in cases of shipments against contract
alone and shipments on CAD/DA basis. Where ADs doubt the bonafides and standing
of the buyers/consignees abroad or where owing to common interest or otherwise they
suspect collusion with the intent of' delaying or avoiding repatriation of export proceeds
ADs should report such cases promptly to Bangladesh Bank. Similarly, ADs should
report to Bangladesh Bank cases where it comes to their knowledge that the exporters
are directly or indirectly connected with or have any financial or other interest in the
buyer/consignee abroad. Where felt necessary, discreet enquiry about the bonafides and
credentials of the charter party should also be made in case the shipment is to be against
a charter party Bill of Lading so as to avoid loss of cargo/foreign exchange.

20. Chapter 8, Para 7 “Certification of EXP
forms by ADs”
• :
• (b) In order to avoid any loss of foreign exchange to the country, ADs shall not
certify any EXP form unless they have satisfied themselves with regard to the
followings: (iv) Bonafides of the buyers/consignees abroad and their credentials
etc. where necessary, ADs should make discreet enquiries in this regard through
their correspondents abroad etc., greater care should be taken particularly in
cases of shipments against contract alone and shipments on CAD/DA basis.
Where ADs doubt the bonafides and standing of the buyers/consignees abroad or
where owing to common interest or otherwise they suspect collusion with the
intent of' delaying or avoiding repatriation of export proceeds ADs should report
such cases promptly to Bangladesh Bank. Similarly, ADs should report to
Bangladesh Bank cases where it comes to their knowledge that the exporters are
directly or indirectly connected with or have any financial or other interest in the
buyer/consignee abroad. Where felt necessary, discreet enquiry about the
bonafides and credentials of the charter party should also be made in case the
shipment is to be against a charter party Bill of Lading so as to avoid loss of
cargo/foreign exchange.

21. Trade Based Money Laundering
• Factors
• Over invoicing
• Under invoicing
• Multiple invoicing
• Short shipment
• Over shipment
• Phantom shipment
• Complicated payment structure
• Discount
• Price changing
• Non-releasing goods

22. Trade Based Money Laundering
• Factors
• Fake bill of entry
• Fake bank guarantee against advance remittance
• Misuse of bond license
• Free of cost import of raw materials
• Import of non physical goods (soft ware)
• Purchase online by using credit cards
• Buyer nominated supplier can quote higher price
• Export proceeds as remittance for claiming incentive
• Purchasing discrepant export bills
• Taking loan from OBU, EPZ and transfer abroad

25. TBML ALARTS
• Importer and exporter are related parties and there is common interest .
• Fake bill of entry.
• Fake bank guarantee against advance remittance
• LC/Contract/Guarantee parties are controlled by Politically Exposed
Persons (PEPs) or Influential Persons (IPs).
• Goods are inconsistent with beneficiary's business line .
• Transaction structure appears unnecessarily complex,
• Frequent amendment/extension/cancellation pattern.
• The transaction appears to involve shell companies for the purpose of hiding
the true parties involved.
• The price is unusual, e.g. very high or very low.
• Under Invoicing (against market price).
• Over Invoicing (against market price).

26. TBML ALARTS
• Invoice showing significant amount of misc. charges e.g.
handling charges.
• indications of double invoicing / Multiple Invoicing
• The payment terms inconsistent with the transaction
• Payment instruction changes
• Applicant (customer) controls the payment.
• Trade fraud by supplier.
• There are no goods (Phantom Shipment).

27. TBML ALARTS
• Different HS Code is used.
• Quantity of goods exceeds the known capacity of the shipping
containers
• High risk goods/services are involved.
• Transshipment through a country for no apparent reason.
• The mode or method of shipping is unclear
• Vessel/Container number can not be tracked through web
search
• Clauses in the documentary credit.

28. TBML ALARTS
• Essential documents presented in copy form or not presented
• The customer is overly keen to waive discrepancies.
• There are indications that documents have been reused.

29. Assessment of TBML Risk
• Infrastructure/Institutional Level Risk Assessment- price verification,
sanction screening, vessel tracking to detect TBML.
• Product/services level vulnerability –no structured sanctioned
screening, no commercial price verification, no dual use of goods
checked.
• Customer Level TBML Risk Assessment.
• TBML Geographic level risk assessment.
• TBML transaction level risk assessment.

30. TBML Compliance Framework for Sonali
bank Limited
• Risk Based Approach(RBA)
• Trade Transaction monitoring
• Sanction screening
• Shipment related monitoring

31. TBML Compliance Framework for Sonali
bank Limited
• PEPs/Ips
• Shell Companies/EDD
• Dual Use of Goods
• Price verification
• Adverse Media News
• Suspicious Transaction/Activity Reporting
• Training on Trade Based MoneyLaundering

32. Defining level 1,2 and 3 officials of
Sonali bank limited

39. • A Simple Checklist for frontline official
• The following elements, which are not exhaustive, should be checked via
automated /manual
• procedure:
• a) Unit prices
• b) Number of items shipped
• c) Shipping marks
• d) Trade term, often an Inco terms rule followed by a place
• e) Commercial contract
• f) The documentary credit applications
• g) The guarantee applications
• h) The documents presented under import documentary credits
• i) The documents presented under export documentary credits
• j) The documents presented under import documentary collections
• k) The documents presented under export documentary collections
• l) Guarantee demands
• m) All incoming and outgoing non-SWIFT messages etc.