Trade Patterns and Red Flags

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Trade Patterns

Trade patterns refer to the recurring behavior of prices and market trends that can be observed in financial markets over time. These patterns can provide valuable insights for traders who use technical analysis to make investment decisions. However, it’s important to note that trade patterns are not foolproof and can sometimes indicate false signals. As such, traders must exercise caution and look for red flags that may suggest a trade pattern is not reliable.

Red flags are the risk indicators of suspicious activities. A risk indicator shows or implies that there is a chance that odd or suspicious conduct may occur. Although a single indicator regarding a client or transaction may not be sufficient to raise suspicion of an environmental crime, it should stimulate additional monitoring and analysis as necessary.

The existence of several signs should also prompt further investigation. The indicators should be viewed in light of the specific risk environment of a nation and an organization and should be updated accordingly. This might consider an institution’s geographic location, business segments, goods or services, and customer interactions.

Trade Patterns

Trade Patterns and Red Flags

The following are some examples of red flags:

  • Logging industry businesses that often trade with offshore financial centers.
  • Significant cash withdrawals from banks in rural locations close to illicit forestry or mining operations.
  • Accepting wire transfers and deposits from many sources unrelated to business or finances. This applies to contracts from areas with no logical relationship to the person’s or organization’s primary place of business or residence.
  • Transfers from the nation where the gold refineries are to the nations where the gold is mined, with the majority of the transfer nearly immediately being converted to cash.
  • Regular payments from extractive industry businesses to suppliers or beneficiaries that have nothing to do with the operation or business of the legal entity.
  • An increase in transactions in the mining and logging sectors between unregistered businesses or people, such as a non-license-holding.
  • Unaccounted riches, financial transfers involving top authorities, and politically exposed individuals or their family members in positions of authority over the administration or protection of natural resources, such as forestry or mining officials, are all red flags.
  • People and organizations are identified as involved in corruption, environmental or other organized crimes through media, NPO investigation reports, or reports by international bodies (both public and confidential).
  • Clients with mining permits who work in or near active conflict zones.
  • A person listed as a management or director of several businesses involved in environmental exploitation.
  • Regular share purchases and sales by businesses with logging or agricultural licenses, particularly when shareholders are in different jurisdictions.
  • Businesses like refineries or wood processing plants only pay their staff in cash or on a commission basis, potentially providing a strong incentive for money to be invested in illegal operations.
  • Businesses have sales to a corporation with whom they have a direct connection, such as a parent, that are made at a discount from market pricing and generate little money or less than would be anticipated for their declared activity. After extraction is complete, this may occasionally be followed by the filing for bankruptcy.
  • Purchases of enterprises by individuals with insufficient waste sector expertise and experience to run entities operating in a highly regulated field.
  • Large deposits and withdrawals of cash by businesses in the waste management sector.
  • Large international cash transfers occurred between local waste disposal sector businesses and recognized waste trafficking source nations.
  • Large international cash transfers between recognized major importers or destinations for trash trafficking and local waste disposal sector enterprises.
  • Companies involved in the metallurgy and waste disposal industries exhibit one or more of the following traits or behaviors:
  • Holds a location that is not associated with any economic activity, 
  • Holds an address that is unrelated to any economic activity, 
  • Has shares sold below book value, 
  • Has excessive cash withdrawals reported on bank accounts held by waste management sector enterprises, 
  • Lacks an effective organizational structure.
Trade Patterns
  • Companies in the waste management industry have received payments or trade bills for waste kinds incompatible with those they are licensed to handle.
  • Trade deals that support extractive industries operating in high-risk regions, such as those with a history of corruption, armed conflict, or illegitimate resource exploitation.
  • False or dubious claims made on bank loans, letters of credit, customs, and transportation papers about the wood trade.
  • Trade deals involving ecologically delicate items such as round logs when there is a moratorium or when national authorities have forbidden this.
  • Funds being mixed through affiliated companies and the export or sale of underpriced goods while utilizing back-to-back invoices to imply a continuing, illegitimate transfer pricing scheme.
  • Natural resource chokepoints where illegally exploited natural resources enter the legitimate supply chain include intermediaries like sawmills, lumber processing plants, and metal refineries. Possible red flags include the apparent mixing of revenue from various sources with ties to the mining or logging industries. If combined with other red flags to signal suspicious behavior, sawmills or gold refineries may also be linked to unique identifier data, such as bank accounts or transactions, company data, tax codes, and specialized equipment orders or imports.
  • Local precious metals aggregators who occasionally pose as refiners. There is a significant trend in Africa right now.
  • According to Schmid, every vendor selling seafood threatened with extinction or for which fishing is restricted obviously calls for closer examination. The so-called marine riches, prized in Cantonese cuisine as delicacies, include shark fin, abalone, sea cucumbers, and the swim bladders of fish like totoaba and Nile perch. Other highly prized fish include bluefin tuna and sturgeon, for which further due diligence should be standard.
  • Suppliers must be able to show proof of the fishing boats used to catch the seafood, such as a certificate of vessel name or ownership or a special vessel identification number. It is a smart option for someone in compliance to cross-reference these specifics with lists of infractions supplied by authorities regulating vessel registration and operation. Red flags should be raised if a new supplier refuses or cannot submit the required paperwork since this might mean that the ship in question or its registered owner has a history of infractions.
  • Regular use of “ports of convenience” deserves more examination, especially if the fishing vessel also flies under a port of convenience flag. These ports are situated in areas not a party to the Agreement on Port State Measures or PSMA, which is the main international regulation to combat IUU fishing. The likelihood that a vessel flying a flag of convenience is selling IUU fish is quite high if the vessel docks at a port that is not a member of the PSMA and doesn’t appear to have robust port restrictions.
Trade Patterns

Final Thoughts

Trade patterns refer to the consistent behavior of markets or individual assets over time. They can be used to predict future movements in the market and make investment decisions. Some common trade patterns include trend lines, support and resistance levels, and moving averages. However, it’s important to be aware of red flags in trade patterns that can indicate potential risks or fraud.

Red flags can include sudden spikes or drops in prices, irregular trading volumes, and suspicious trading activity. It’s important to thoroughly research any investment opportunity and be cautious of anything that seems too good to be true. Additionally, it’s important to be aware of geopolitical and economic factors that can impact trade patterns, such as changes in government policies, natural disasters, and global pandemics. Keeping up to date on current events and analyzing market trends can help investors make informed decisions and mitigate potential risks.

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