An analyst reviewing trade finance transactions notices an increase in price of 25% over 12 months for commodities with the same specification and quantity.
Which action should the analyst take?
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A. B. C. D.B
The analyst should select option B: "Produce an investigation report that considers client activity and factors that may have legitimately affected transaction cost." This option is the most appropriate as it allows the analyst to investigate the potential money laundering activity while also taking into account other legitimate reasons for the increase in price.
An increase in price of 25% over 12 months for commodities with the same specification and quantity could be an indicator of trade-based money laundering (TBML), where criminals may over-invoice or under-invoice goods to move funds across borders. However, it is also possible that the increase in price could be due to legitimate factors, such as changes in market conditions or supply and demand.
In order to properly investigate the increase in price, the analyst should produce an investigation report that considers client activity and factors that may have legitimately affected transaction cost. This report should include information on the client's business activities, the commodity being traded, the supply chain, and any other relevant information that may explain the increase in price.
The report should also identify any potential red flags or suspicious activity, such as inconsistencies in documentation or unusual payment patterns, that may indicate TBML. If the report finds evidence to substantiate the analyst's suspicion of TBML, the analyst should then consider submitting a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) to the Financial Investigation Unit (FIU).
However, producing a SAR/STR without first conducting a thorough investigation and considering other legitimate factors could result in false accusations and damage to the reputation of the client. Therefore, option B is the most appropriate course of action, as it allows the analyst to investigate the potential TBML activity while also taking into account other legitimate reasons for the increase in price.