The use of drafts under Documentary Credits

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Escrow

An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties, or an account established by a broker for holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction; or, a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. The word derives from the Old French word escroue, meaning a scrap of paper or a scroll of parchment; this indicated the deed that a third party held until a transaction was completed.

Escrow generally refers to money held by a third-party on behalf of transacting parties. It is mostly used regarding the purchase of shares of a company. It is best known in the United States in the context of real estate (specifically in mortgages where the mortgage company establishes an escrow account to pay property tax and insurance during the term of the mortgage). Escrow is an account separate from the mortgage account where deposit of funds occurs for payment of certain conditions that apply to the mortgage, usually property taxes and insurance. The escrow agent has the duty to properly account for the escrow funds and ensure that usage of funds is explicitly for the purpose intended. Since a mortgage lender is not willing to take the risk that a homeowner will not pay property tax, escrow is usually required under the mortgage terms. Escrow companies are also commonly used in the transfer of high value personal and business property, like websites and businesses, and in the completion of person-to-person remote auctions (such as eBay), although the advent of new low cost online escrow services has meant that even low cost transactions are now starting to benefit from use of escrow. In the UK, escrow accounts are often used during private property transactions to hold solicitors' clients' money, such as the deposit, until such time as the transaction completes. Other examples include purchases of a second hand car, where the money may be released at the end of a warranty period, deposits for a property rental, where the money is released after the tenant moves out, provision of construction services, where the money may be released when the building work is complete to a defined standard, or when defined parts of the work are complete, perishable food products, sold on live seafood auctions (such as Gfresh).

ASYCUDA = Automated SYstem for CUstoms DAta

ASYCUDA = Automated SYstem for CUstoms DAta

ASYCUDAWorld is the latest result of a process that began when UNCTAD identified the first signs of the commercial potential of the World Wide Web. UNCTAD’s Trade Efficiency Summit (Columbus, Ohio, 1994) looked at how to reduce transaction costs by applying information technologies to every link of the trade transaction chain. At the time, the potential annual cost savings were estimated at up to $100 billion.

The $100 billion target remains elusive, but an initiative launched by the G-7 was based on the belief that it was nonetheless achievable, as long as customs data requirements can be harmonized and simplified. That objective is now being pursued by the Brussels-based World Customs Organization, which is developing a global, harmonized standard data set that uses uniform electronic messages. The WCO Customs Data Model, as it is called, is likely to have a major impact on the processing of business-to-business, business-to-government and government-to-government transactions. 

These developments, combined with the fact that 85 countries around the world are already using the same customs IT system, ASYCUDA, represent a formidable opportunity for using the Internet to make international trade simpler and cheaper whilst also making international markets more accessible to enterprises from developing countries.

ASYCUDAWorld builds upon the successful experiences of ASYCUDA++, which was designed to function in difficult telecommunications environments, but also to operate through GSM networks that are already widespread in developing countries. Being web-based, the ASYCUDAWorld system will allow Customs Administrations and traders to handle most of their transactions – from Customs Declarations to Cargo Manifests and Transit documents – via Internet.

What is PSI?

Pre-Shipment Inspection or PSI, is a part of supply chain management and an important and reliable quality control method for checking goods' quality while clients buy from the suppliers.

What is HS Code?

The Harmonized Commodity Description and Coding System generally referred to as “Harmonized System” or simply “HS” is a multipurpose international product nomenclature (নামকরণ-পদ্ধতি) developed by the World Customs Organization (WCO).

Flyleaf

(a blank page at the beginning or end of a book.)

Currency Notes are to be packed denomination-wise separately with 100 pieces in each packet and those packets shall be stitched / banded as per specification of Bangladesh Bank. A cash slip (fly leaf) bending at left side of each packet is to be pasted and signed by the official who has counted / verified the notes in the packet. Branch’s rubber stamp (round seal) is to be affixed on both sides of each packet covering part of Cash Slip (fly leaf) and a part of the currency notes. 

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

...provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment. SWIFT also sells software and services to financial institutions, much of it for use on the SWIFTNet Network, and ISO 9362. Business Identifier Codes (BICs, previously Bank Identifier Codes) are popularly known as "SWIFT codes".

The majority of international interbank messages use the SWIFT network. As of 2015, SWIFT linked more than 11,000 financial institutions in more than 200 countries and territories, who were exchanging an average of over 15 million messages per day (compared to an average of 2.4 million daily messages in 1995). SWIFT transports financial messages in a highly secure way but does not hold accounts for its members and does not perform any form of clearing or settlement.

SWIFT does not facilitate funds transfer: rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.

SWIFT is a cooperative society under Belgian law owned by its member financial institutions with offices around the world. SWIFT headquarters, designed by Ricardo Bofill Taller de Arquitectura are in La Hulpe, Belgium, near Brussels.

IBAN (International Bank Account Number)

...is an internationally agreed system of identifying bank accounts across national borders to facilitate the communication and processing of cross border transactions with a reduced risk of transcription errors. It was originally adopted by the European Committee for Banking Standards (ECBS), and later as an international standard under ISO 13616:1997. The current standard is ISO 13616:2007, which indicates SWIFT as the formal registrar. Initially developed to facilitate payments within the European Union, it has been implemented by most European countries and numerous countries in the other parts of the world, mainly in the Middle East and in the Caribbean. As of February 2016, 69 countries were using the IBAN numbering system.

The IBAN consists of up to 34 alphanumeric characters comprising: a country code; two check digits; and a number that includes the domestic bank account number, branch identifier, and potential routing information. The check digits enable a check of the bank account number to confirm its integrity before submitting a transaction.

CHIPS (Clearing House Interbank Payments System)

...is a United States private clearing house for large-value transactions. By 2015 it was settling well over US$1.5 trillion a day in around 250,000 interbank payments in cross border and domestic transactions. Together with the Fedwire Funds Service (which is operated by the Federal Reserve Banks), CHIPS forms the primary U.S. network for large-value domestic and international USD payments where it has a market share of around 96%. CHIPS transfers are governed by Article 4A of Uniform Commercial Code.

Unlike the Fedwire system which is part of a regulatory body, CHIPS is owned by the financial institutions that use it. For payments that are less time-sensitive in nature, banks typically prefer to use CHIPS instead of Fedwire, as CHIPS is less expensive (both by charges and by funds required). One of the reasons is that Fedwire is a real-time gross settlement system, while CHIPS allows payments to be netted.

The Foreign Account Tax Compliance Act (FATCA)

FATCA promotes cross-border tax compliance by implementing an international standard for the automatic exchange of information related to US taxpayers. FATCA regulations require tax authorities to obtain detailed account information for US taxpayers on an annual basis.

FATCA is intended to increase transparency for the Internal Revenue Service (IRS) with respect to US persons who may be investing and earning income through non-US institutions. While the primary goal is to gain information about US persons, FATCA imposes tax withholding where the applicable documentation and reporting requirements are not met.

Financial Action Task Force (on Money Laundering) (FATF)

The Financial Action Task Force (on Money Laundering) (FATF), also known by its French name, Groupe d'action financière (GAFI), is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. 

In 2001 its mandate expanded to include terrorism financing. It monitors progress in implementing the FATF Recommendations through "peer reviews" ("mutual evaluations") of member countries. The FATF Secretariat is housed at the OECD headquarters in Paris.

The Wolfsberg Group

The Wolfsberg Group is an association of thirteen global banks which aims to develop frameworks and guidance for the management of financial crime risks, particularly with respect to Know Your Customer, Anti-Money Laundering and Counter Terrorist Financing policies.

The Group came together in 2000, at the Château Wolfsberg in north-eastern Switzerland, in the company of representatives from Transparency International, including Stanley Morris, and Professor Mark Pieth of the University of Basel, to work on drafting anti-money laundering guidelines for Private Banking. The Wolfsberg Anti-Money Laundering (AML) Principles for Private Banking were subsequently published in October 2000, revised in May 2002 and again most recently in June 2012.

Enhanced Due Diligence (KYC)

KYC Enhanced Due Diligence, or simply EDD, is specifically designed for dealing with high-risk or high-net worth customers and large transactions. Because these customers and transactions pose greater risks to the financial sector, they are heavily regulated and monitored in order to ensure that everything is above board. Companies and financial institutions were first compelled to conduct EDD by the USA PATRIOT Act in 2001, a provision which is still in effect today. 

The Patriot Act also requires that offshore banking institutions, private banking organisations, and correspondent accounts abide by EDD regulations and laws. There are several characteristics that distinguish regular KYC policies from EDD policies. EDD policies are considered to be “rigorous and robust”, meaning that they require significantly more evidence and detailed information to be collected. The entire process of EDD must be documented in detail, and regulators should be able to have immediate access to the data. Professionals are often hired in order to analyse data that is collected regarding clients, and the reliability of information sources is of utmost importance.

Due Diligence

Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care.

It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition. The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate in a reflexive manner on the decision at hand and all its costs, benefits, and risks.

What is EDD?

CDD is the process through which you develop an understanding of your customers and the ML/TF risks they pose to your business.

In some higher ML/TF risk circumstances an increased level of CDD is required. This is known as enhanced CDD or “EDD”. As part of standard CDD you must obtain sufficient information to determine whether you require EDD on your customer.

Front organization

A front organization is any entity set up by and controlled by another organization, such as intelligence agencies, organized crime groups, banned organizations, religious or political groups, advocacy groups, or corporations. Front organizations can act for the parent group without the actions being attributed to the parent group thereby allowing them to hide from public view.

Front organizations that appear to be independent voluntary associations or charitable organizations are called front groups. In the business world, front organizations such as front companies or shell corporations are used to shield the parent company from legal liability. In international relations, a puppet state is a state which acts as a front (or surrogate) for another state.

Concentration account

A concentration account is a sole account used for the internal purposes of a financial institution to facilitate the processing and settlement of multiple or individual customer transactions within the institution, usually on the same day.  

Such accounts can lead to the concealment by financial institutions of transactions made by customers. However section 325 of Title III of the USA PATRIOT Act banned their use for such purposes by prohibiting financial institutions from allowing clients to direct transactions that move their funds into, out of, or through the concentration accounts of the financial institution; and prohibit the financial institutions from informing clients about the existence of such accounts and disallows any disclosure that may allow a customer a way of identifying such accounts that the financial institution may use. Section 325 also requires that financial institutions document and follow methods of identifying where the funds are for each customer in a concentration account that comingles funds belonging to one or more customers.

Wash trade

A wash trade is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.^[1] First, an investor will place a sell order, then place a buy order to buy from himself, or vice versa. This may be done for a number of reasons:

• To artificially increase trading volume, giving the impression that the instrument is more in demand than it actually is.
• To generate commission fees to brokers in order to compensate them for something that cannot be openly paid for. This was done by some of the participants in the Libor scandal.

Some exchanges now have protections built in, sometimes mandatory for participants, such as STPF (Self-Trade Prevention Functionality) on the Intercontinental Exchange (ICE).
Wash trading has been illegal in the United States since the passage of the Commodity Exchange Act (CEA), of 1936.

Smurf (money launderer)

A smurf is a colloquial term for a money launderer, or one who seeks to evade scrutiny from government agencies by breaking up a transaction involving a large amount of money into smaller transactions below the reporting threshold.

Shell Company

A shell company is considered to be an incorporated company with no independent operations, significant assets, ongoing business activities, or employees. Shell companies tend to be conduits or holding companies.

Phantom shipping

No goods are actually shipped. The fraudulent documentation generated is to justify payment abroad.

Hawala or hewala (Arabic,meaning transfer or sometimes trust)

also known as havaleh in Persian, or hundi or—in Somali, xawala or xawilaad—is a popular and informal value transfer system based not on the movement of cash, or on telegraph or computer network wire transfers between banks, but instead on the performance and honour of a huge network of money brokers (known as "hawaladars"). While hawaladars are spread throughout the world, they are primarily located in the Middle East, North Africa, the Horn of Africa, and the Indian subcontinent, operating outside of, or parallel to, traditional banking, financial channels, and remittance systems.

Compliance; yes or no

Cost of Compliance is high.

But cost of non-compliance is higher.