Preventing criminals and terrorists from using the global financial system is critically important. Implementing global regulation across jurisdictions with multiple stakeholders is a challenge, which can have unintended negative consequences.

The 2017 Trade Finance Gaps, Growth, and Jobs Study of the Asian Development Bank (ADB) identified unintended consequences from anti-money laundering and combating the financing of terrorism (AML/CFT) regulation as an important contributor to global market gaps, estimated at $1.5 trillion, for small and medium-sized enterprise (SME) financing in developing countries.

Trade Finance Scorecard: Regulation and Market Feedback

The Trade Finance Scorecard: Regulation and Market Feedback (Scorecard) is the start of a work in progress.  The objective is to launch a process which complements the work of industry bodies, the Financial Stability Board (FSB), the Financial Action Task Force (FATF), and regulatory authorities around the world.

AML/CFT in Trade Workshop

The ADB’s Trade Finance Program (TFP) organized the AML/CFT in Trade Workshop to tackle five issues affecting our ability to fight crime in the financial system, as the next step after the publication of the Scorecard.

The Workshop, hosted in Singapore 28-29 March 2019, brought together over 50 senior leaders from international bodies, industry associations, regulatory authorities and banks, to develop concrete steps to solve persistent problems in AML/CFT.  Organizations such as the Financial Stability Board, the Bankers’ Association for Finance and Trade (BAFT), the Wolfsberg Group, the International Chamber of Commerce, as well as global banks and bank regulators played key roles.

The Workshop led to agreement on several substantive next steps. A major step forward, for example, is the agreement to create a standard Suspicious Activity Reports (SARs) template for use across jurisdictions, enabling better data collection and analysis. The proposed template will enable the application of artificial intelligence and other emerging technology to make better use of such reports, enable the identification of trends across jurisdictions and otherwise improve the impact of SARs in intelligence, investigative, and prosecutorial activity around the globe. A feedback loop will also be developed to inform industry of the impact of SARs reports and to assist in improving the quality of these reports and accompanying documentation for investigative purposes.

Trade-based money laundering and terrorist financing are serious plights.  Our Trade Finance Gaps, Growth and Jobs Study shows efforts to stem anti-money laundering in the financial system contributing to the annual trade finance gap of US $1.5 trillion.   We need to stop criminals from using the financial system, but we know misdirected efforts to stop financial crime can deprive legitimate SME business of the support they need to grow, create jobs and contribute to development.

Our efforts to identify persistent issues in this space and to convene stakeholders to advance solutions to these issues are core to our objective of achieving Sustainable Development Goals; to ensure availability of financing while advancing financial sector regulation and compliance, all with a view to contributing to trade-supported international development and economic inclusion.