On 8 February, a Policy Alert from K2 Integrity warns that, in recent years, importers, exporters, and their financial institutions have shifted away from traditional, document-based trade finance instruments and toward non-documentary, “open account” settlement through clean wire transfers. Since 2014, traditional trade transactions have declined by 58% as a proportion of overall message traffic, according to data from SWIFT—despite a continued expansion of global trade in goods and services over the same period. This, it says, significantly increases the sanctions risks that financial institutions face in the maritime sector, which has been a recent focus of US and European authorities. Without access to the information included in traditional trade finance documents banks may be insufficiently positioned to identify illicit shipments and vessels, flag trade-based money laundering schemes, and assess key sanctions and proliferation financing risks.
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