Commodities Futures Trading Compliance

‍BITE is a tool suite that assists companies in multiple domains to reduce risk in their supply chain. Our AI technology assists companies to remain on the right side of compliance through cost-effective, easy-to-use tools.

This document covers information and processes to assist companies understand the risks involved with commodities trading, futures trading and underwriting of commodities.

Commodities Trading, Commodities Futures Trading, and Commodity Underwriting

Traded commodities consist of naturally occurring materials or goods and may include oil and natural gas, metals such as gold, silver and aluminum and “soft” commodities such as sugar, cotton, cocoa and coffee.

Commodity Futures Trading: Commodities can be bought and sold in real time on exchanges like stocks. Well-known exchanges include the Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX) and London Metal Exchange (LME), all of which participate in commodity futures trading.

Commodity Trade: refers to the direct exchange, purchase or trade in commodities (such as cocoa, grain, metals etc), and is more a business to business transaction.

Commodity Underwriting: generally refers to the risk associated with lending money to businesses that trade in commodities, for example lending money to a mining company wishing to build a gold mine.

US Government agencies involved in regulating commodities include the following:

• The Commodities Future Trading Commission (CFTC)
• The National Futures Association (NFA)

The Bank Secrecy Act (BSA), as amended by the Patriot Act, is designed to prevent, detect, and prosecute international money laundering and the financing of terrorism. The BSA and related regulations require futures commission merchants (FCMs) and introducing brokers (IBs) to establish anti-money laundering (AML) programs, report suspicious activity, verify the identity of customers and apply enhanced due diligence to certain types of accounts involving foreign persons. In the future, it is possible that commodity pool operators (CPOs), commodity trading advisors (CTAs), swap dealers (SDs), major swap participants (MSPs), and other CFTC registrants may be required to comply with anti-money laundering (AML) regulations.

The commodity trading community - whether they are extracting, manufacturers, shippers, consignees, financiers, futures traders or other entities involved in the commodity supply chain - should employ “reasonable care” in reviewing their transactions to avoid compliance problems.

Why is Sanctions Compliance is Important:

1. National Security: Preventing transactions with denied parties or watch listed entities that pose a threat to national and global security.
2. Economic Security: Protecting national trade competitiveness and supporting foreign policy objectives while maintaining competitiveness in the global trade markets.
3. Global Security: Implementing effective sanction controls supports national contributions to global security – a safe international supply chain is only as effective as its weakest link and malign actors exploit those weak leaks.
4. Avoid corporate reputational damage. Companies that ignore compliance obligations are subject to criminal and severe civil penalties (see matrix below).

Regulations apply based on two core areas:

1. The entity/person, organization or destination that is involved in the commodity trade.
2. The type of commodity being traded.

What are the rules you need to adhere to: There are several compliance control rules and regulations. There are multiple statutes and regulations relevant to this space,  but companies should be aware several other statutes pertaining to money laundering, conspiracy, and false statements can be additionally charged for egregious, willful violations.

For trade-specific regulations, these include, but not limited to the Bank Secrecy Act, Sanctions statutes, and more.

For a full list of regulations and statutes relevant to Commoditites / Futures trading companies, please log into our app to get access to the full Playbook.

How does BITE Help:

The BITE Playbook, available in the BITE app, helps you navigate these regulatory requirements and quickly understand which agencies enforce what regulations associated with your specific transaction as well as a mapping for how each BITE module helps you remain compliant with specific regulations.

BITE Data: our BITE Playbook maps directly to watchlists, Harmonized Schedule codes and commodity screening lists, allowing you to quickly check a commodity or person against the extensive filters in our platform.

BITE includes extensive, in-depth training modules to help users get set up for success and walk you through how to stay on the right side of compliance.

Sign up for the app here: https://app.bitedata.io/ or send us an email to set up a demo: bite@nuborders.com