The “Dark Fleet” exposes financial institutions to sanctions violations, lawsuits, and losses. Learn how to mitigate these hidden risks.
DCW maintains a list of recently-decided court cases involving commercial letters of credit, demand guarantees, and other trade finance instruments.
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Someone recently asked me "if you had one wish (in the AML world), what would you fix?" ... and then a few days later someone else asked me, over drinks and world-problem solving, "what is your biggest green flag that you look for when vetting banks and fintechs?” Funny enough, the answer was pretty much the same:
Executive authority within the AML Officer function
Eight years ago in my mission to operationalize AML/Sanctions threats and provide actionable solutions for global clients, I wrote about the illusion of authority. Encouraging banks to be serious about their culture of compliance. The illusion is still happening. I get calls daily from AML Officers (please stop calling them BSA Officers) telling me that their boss's boss did not approve their simple ask for an extra half FTE (full-time equivalent) employee. Insanity. And crazy enough, we have weekly consent orders and failing bank/fintech partnerships happening daily. I wonder why.
Want to ensure your bank or credit union is doing what it needs to do with regard to AML compliance? Give actual (not the illusion of) authority to the AML Officer.
This is what it looks like:
Want to attract and keep a good bank partner as a regulated fintech? Have an AML Officer as a separate and distinct person and with different areas of responsibility from general compliance issues. At a fintech, this is what it looks like:
And yes, this applies to all types of fintechs. Just a start-up? That's ok. Don't bury your AML expert (not yet Officer). Don't try and save money and hire a compliance person "that's also AML". It doesn't work.
Not to give away too much of the secret sauce, but the best indicators for me of a treasure trove of AML and Sanctions deficiencies within any type of institution – traditional FI or fintech – are:
If you are on the board of a bank, fintech, or a venture capitalist investing in fintechs - look for those indicators. As a VC, you can guarantee your investors a lower ROI if they have either of those vulnerabilities.
Many bank consent orders over the last year or so mandate a baseline standard of "executive authority" for the AML Officer. It truly is one of the biggest changes that has the highest level of impact on the effectiveness of an AML/Sanctions program.
In the first of his series of DCW articles on major issues surrounding potential revision of UCP, ICC Banking Commission Senior Technical Advisor Dave Meynell examines the concept of negotiation.
Letter of credit cases can reveal a great deal about how the industry's practice rules and standards are viewed and interpreted by the courts.
When issuing banks insert complex reimbursement terms and self-serving conditions into their credits, it distorts the purpose of the product, causes problems for confirming banks, and drives exporters away from using LCs.
DCW Editorial Note: This previously unpublished material reflects the thinking and writing of Professor James E. Byrne over the period
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