A report has found that UK banks active in trade finance are vulnerable to money laundering.

The Financial Conduct Authority (FCA)-authored study says that about 50% of the 17 banks it investigated lack effective controls to ensure they are not funding financial crimes. As well as money laundering, the banks in question are also at risk of financing terrorism, due to ineffective risk management programmes.

The report reads: “About half of the banks had no clear policy or procedures document for dealing with trade-based money laundering risks. As a result, some banks failed to implement adequate controls to identify potentially suspicious transactions.”

Part of the problem is the lack of specific financial crime training for trade finance staff, the FCA finds. Inadequate checks on documentation is also an issue, with the report citing an example of a transaction in which scrap metal was being sold by a company in the British Virgin Islands to one in Dubai. However, the documentation did not specify who the recipient of the cargo was and “the bank did not appear to have carried out any further inquiries”.

The survey examined the trade finance activities of four major UK banks, five global wholesale and investment banks and a number of smaller overseas between September 2012 and February 2013, visiting offshore back-office trade finance functions in April.

The FCA’s chief executive Martin Wheatley has vowed to “make Britain a hostile place for all criminals to profit from their crimes”.

GTR attempted to speak to the International Chamber of Commerce’s Banking Commission but was told by a spokesperson that “as the report is issued by a national authority, we are unable to comment from our international perspective”.