Beyond placement, layering and integration – the perception of trade-based money laundering risk in UK financial services
| Date | 07 October 2019 |
| Pages | 614-625 |
| DOI | https://doi.org/10.1108/JMLC-12-2018-0070 |
| Published date | 07 October 2019 |
| Author | Mario Menz |
Beyond placement, layering
and integration –the perception of
trade-based money laundering
risk in UK financial services
Mario Menz
Graduate School, University of West London, London, UK
Abstract
Purpose –The purpose of this study wasto investigate the perception of trade-based money launderingin
Letters of Credit (“L/C”) transactions among trade finance practitioners in the UK banking sector and to
compare it to the perception of the same risk by the FinancialConduct Authority (“FCA”), the regulator of the
UK’s bankingsector.
Design/methodology –A survey was used to carryout research among financial services professionals
engaged in tradefinance in the UK.
Findings –This paper contributes to the existing literature in a number of ways. First, it investigates
the perception of trade-based money laundering risk from the perspective of financial services
professionals, which has not previously been done. Second, it argues that the perception of trade-based
money laundering in financial services is overly focussed on placement, layering and integration, and
that the full extent of the offence under the Proceeds of Crime Act 2002 is less well known. It further
found that financial services firms need to improve their understanding of the nature of trade-based
money laundering under UK law.
Practical implications –This study argues that the financialservices sector’s perception of trade-based
money launderingrisk in trade finance is underdeveloped and makessuggestions on how to improve it.
Originality/value –It provided unique insightinto the perception of trade-based money laundering risk
among financialservices professionals.
Keywords Banking, Trade-based money laundering, Risk, Regulation, Compliance, Trade finance,
Risk perception, Risk management, FCA, Proceeds of Crime Act 2002, Financial services regulation
Paper type Research paper
1. Introduction
This article presents the findings of an empirical study into trade-based money laundering
risk perception carried out in the UK financial services sector in 2015. The purpose of the
study was to investigate the perception of money laundering in Letters of Credit (“L/C”)
transactions among trade finance practitioners in the UK banking sector, and to compare it
to the perception of the same risk by the Financial ConductAuthority (“FCA”), the regulator
of the UK’s banking sector. The study aimed to (i) ascertain to what extent these two
perceptions differ, and (ii) to explain the reason for these differences. The article will first
describe how and L/Cs work and will then examine the scholarly literature on the risks
associated with L/Cs, in particular trade-based money laundering. Before presenting the
findings of the research, it briefly discusses the FCA”s expectations of how these risks
should be managed, and how banks have perceived these expectations. The article
concludes with recommendations on how the understanding of trade-based money
JMLC
22,4
614
Journalof Money Laundering
Control
Vol.22 No. 4, 2019
pp. 614-625
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-12-2018-0070
The current issue and full text archive of this journal is available on Emerald Insight at:
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