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Trade Compliance Risk

We have software that helps us see who it is that is searching ‘Supplier Management’ on Google.

Our software tracks business IP addresses and searches coming from them to Google and the other major search engines. We know that 5,000 searches are completed every week for ‘Supplier Management’. You have probably landed on this page because our software has detected searches being made from your company and one of our team has emailed or called you.

We grade searches for accuracy and only speak to a business if the accuracy is 90% or higher that the search was made from their computer.

Why do we do this?

In any business it is important you are cognisant with the risk you face. When it comes to trade compliance risk and trade internationally, you need to understand the laws and regulations relating to what you’re importing or exporting and the geographical risk that comes with that. In this article we explain how you can stay on top of trade compliance risk.

Trade compliance risk - intelligence & risk solutions

According to the WTO world trade exceeded $32 Trillion in 2022. With all of that trade to hide within, it is obvious criminals operate.

Types of Trade Compliance Risk

Whether it is smuggling, bribery, modern slavery, trade based money laundering, fraud or straight forward theft, businesses have to be vigilent to ensure they don’t inadvertently become involved.

There are also international based risks to trade including political unrest, legal alignments, currency, shipping and more.

The common denominator in all trade compliance risk is the human. At some point in all international risk a human is involved. And this is where the intelligence to help firms mitigate risks come from. Enabling a channel for ‘good staff’ to report on ‘bad’ staff making critical mistakes in your business.

There is plenty of good practice to learn from.

Modern Slavery Policy template

Marks & SpencerTescoUnilever and Reckitt Benckiser are all praised in a recent benchmark for modern slavery. CCLA, an investment management company, focuses on managing funds with an eye on ESG, ranked the four big companies as doing well with regard to finding, fixing and preventing modern slavery. They were all ranked in tier one as successfuly managing modern slavery.

All four have a modern slavery policy and also policies on whistleblowing that are adopted globally. This allows for feedback from the far corners of the globe that the grocers source their supplies from.

Trade Based Money Laundering

This is quite simply orchestrated through over or under invoicing of goods, or deliberately not identifying the real goods in transit. One recent case involved a company called Kaloti gold. They painted an export of gold from Morocco silver to enable it to be exported.

In Mexico, a ‘Peso exchange’ is used to move drug money for the Mexican Cartels. When moving drug proceeds from the US, instead of physically trying to move the cash or inserting it into the real economy, they use it to buy goods in the US on behalf of Mexican businesses, who then pay the cartels in the Peso.

Bribery risk can be avoided by facilitating reporting channels for your staff, or those of your suppliers/customers. Whistleblowing software is one effective and efficient way to secure intelligence about what is really going on when successful trades come from overseas business. One example involving an Airbus whistleblower, Iain Foxley, uncovered major bribes in Saudi Arabia by Airbus and GPT, the company he worked for. The below video amply detailsthe riskswhistleblowers take.

What to do to prevent Trade Compliance Risk

Like every form of risk, a matrix to identify the level of risk and the likelihood of it happening is always a good place to start to enable consultations with teams and staff.

A good model to adopt is the CARVER methodology.

Developed by the military for assessing risk, the CARVER Matrix is a security tool that assesses and ranks threats based on six factors: criticality, abuse, recoverability, vulnerability, effect, and recognisability.

CARVER is an acronym:

C – Criticality: How critical is the business?

A- Abuse: How easy would it be to abuse the business?

R – Recoverability: How easy would it be for the business to recover from a risk exploitation?

V – Vulnerability: How vulnerable is the business to the threat?

E – Effect: What effect would a compromise have on the organisation?

R- Recognisability: Do criminals/nefarious actors easily recognise the business vulnerability to be valuable?

The matrix assigns a point value to each of the factors above, on a 1-10 or 1-5 scale, creating a simple way to make a decision about mitigating the riskmore or less important.

A simple Risk Matrix can help.

Trade risk matrix - intelligence & risk solutions

Classifying each risk in a matrix can also help you to decide what is the most important risk to address.

A simple 5×5 matrix to assessthe probability of the risk happening versus the resultant impact of it on your business.

The single most important prevention strategy you can deploy when you understand the risks you face, is to facilitate reporting channels so you get to know about nefarious actors in your supply chain.

Repeated studies have shown the major criticality within these reporting channels is anonymity. Reporting can be dangerous for the reporting person and doing so in a country that has less strict models of human rights or due diligence, means people are less likely to do it if they are going to be identified.

If you need help deploying reporting functions, get in touch with us today.