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The Challenge of Tracking Dual-Use Goods for Trade Finance Compliance

Regulators in all major markets are calling on financial institutions to better monitor money laundering and other risks associated with their trade financing businesses and to implement controls, including for transport of dual-use and other restricted goods. Identifying dual-use goods as part of a broader due diligence process may seem straightforward, but when considered against the outdated, largely paper-based processes that underpin maritime trade today, the task proves both challenging and time-consuming.

Dual-use goods are products and technologies that are common in regular, everyday use but that also could have military applications. Examples of dual-use goods are some models of drones, aluminum pipes with precise specifications or certain kinds of ball bearings. Because of the potential risk that these goods could be used for military purposes, regulators try to control, or at least monitor, when and where these goods are sold. Since the inception of multilateral export control regimes, there have been obligations to monitor dual-use goods. Every actor in the supply chain, including banks financing the goods, are now required to conduct additional checks such as export control licensing, counterparties to the trade, means of transport and locations.

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