Compliance in International Logistics’ Finance – Anti-Money Laundering and Know-Your-Customer

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Abstract
Approximately sixty percent of German goods exports are transported via sea freight. The international shipping industry is dominated by firms registered in offshore centers with little transparency. Criminals feel invited to abuse these opaque constructions for laundering their illegally acquired income or to also circumvent sanctions imposed on certain countries or goods. Banks and other financial enterprises thus need risk management and mitigation processes to stop illegal money laundering and other illegal financial transactions. At the core of these measures is the Know-Your-Customer process. Apart from watching and controlling money flows it is important to identify the owner of both money and firms employed in transactions. However, many offshore centers lack adequate registers that transparently document who is the owner. These registers are ­therefore not easily accessible resources for banks fighting money laundering. This paper discusses the current state of the art in anti-money laundering, mandatory know-your-customer screenings and its challenges in German banks involved in international trade finance.