An expert in maritime fraud has told the Sri Lankan maritime community that trade finance involving shipment of goods by sea can lend itself to money laundering.

Companies involved in transporting goods by sea should take more care in their transactions and make sure they know the people with whom they have transactions, says director of the International Maritime Bureau of the International Chamber of Commerce, Captain Pottengal Mukundan.

Document reliance

"Trade finance depends entirely on documents," Mukundan told delegates at a shipping conference organised by the Sri Lanka branch of the Institute of Chartered Shipbrokers during its 20th anniversary this week.

He also noted that substantial sums of money can be paid out by banks because their only obligation is to verify that the documents comply with the L/C terms, regardless of whether or not goods specified in the documentation have been shipped.

Vulnerable system

"Any system which depends entirely on documents will be vulnerable to abuse by money launderers," he told the delegates. He also advised how traders can guard against involvement in fraud.

"The risk of documentary credit fraud can be minimised if buyers and sellers check the background of their contractual partners before entering into commitments," he said.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.