Meaning and transaction use
FATF and the Egmont Group's trade-based money-laundering indicators support contextual review of customers and transactions. Their handling guidance states that an indicator alone may not establish suspicion and that some indicators require comparison with external information. [S1]
Proposed review method: build a party-and-flow map. Identify the buyer, seller, intermediaries, account holders and transport route; link each to supporting records. Compare the proposed transaction with the stated business model and expected activity. Escalate unexplained differences through the institution's approved review process.
Worked example
Illustrative document review only. An invoice records 1,000 units and the shipping document records 800 units using the same stated unit of measure. Assume no partial-shipment explanation has yet been provided. The invoice value is USD 100 per unit.
Scroll the table horizontally to view all columns.
| Item | Calculation | Result |
|---|---|---|
| Quantity difference | 1,000 - 800 | 200 units |
| Difference against invoice quantity | 200 / 1,000 | 20% |
| Value at stated invoice price | 200 x 100 | USD 20,000 |
The figures identify a 200-unit documentary difference requiring explanation. A partial shipment, document error or another circumstance may be relevant; none is verified in this illustration. Record the missing evidence and reviewer decision without describing the discrepancy as proven wrongdoing.
Proposed transaction review process
Establish the customer profile
Gather identity, ownership, control, business activity and authorised-signatory evidence under the applicable requirements.
Map the trade
Identify goods, counterparties, intermediaries, geography and the commercial rationale.
Reconcile documents and flows
Compare orders, invoices, shipping evidence and payment instructions for consistency.
Resolve and monitor
Record explanations, evidence gaps, escalation decisions and changes to the expected activity.
Evidence checklist
Customer and ownership
Corporate records, ownership chart, relevant identity evidence and authorised representatives.
Commercial rationale
Business profile, contract, product description and expected transaction pattern.
Trade documentation
Invoices, transport records, delivery evidence and any documented amendments.
Payment trail
Account-holder details, payment instructions, third-party involvement and supporting explanations.
Decision framework
| Situation | Proposed action |
|---|---|
| Payment is requested to an unexplained third party | Establish the commercial relationship and follow the institution's escalation procedure. |
| Ownership information is incomplete | Record the gap and obtain the required evidence before treating due diligence as complete. |
| Documents contain inconsistent quantities | Check units, shipment structure and corrected records with the appropriate source owners. |
| Activity changes materially from the recorded profile | Refresh the risk assessment and required review according to policy. |
Common errors to check
- Treating an identity document as the entire customer review.
- Accepting unexplained differences between the trade and payment parties.
- Equating a risk indicator with proven financial crime.
- Failing to retain the evidence supporting a review decision.
Prepare a coherent trade evidence pack
Bring the party map, ownership records, trade documents and payment instructions to a trade-finance preparation discussion. Identify the information the financing institution still needs to complete its own assessment.
Discuss the transactionPrimary references and editorial scope
- FATF and Egmont Group: Trade-Based Money Laundering Risk Indicators, 2021
Contextual use of risk indicators, due-diligence information and cross-comparison of data. Reference checked 17 September 2026.
General preparation guidance. The example is hypothetical and makes no allegation. The proposed checklist does not replace a regulated institution's customer due-diligence, monitoring or reporting requirements.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
