Trade Finance Glossary

Regulations and procedures designed to prevent the use of financial systems for money laundering. Includes transaction monitoring, suspicious activity reporting, and customer due diligence.

A legal document issued by a carrier acknowledging receipt of cargo for shipment. Acts as a receipt, contract of carriage, and document of title. Required to take possession of goods at destination port.

An Incoterm where the seller pays for delivery to the destination port including insurance and freight. Risk transfers to buyer when goods are loaded on vessel. Seller handles export; buyer handles import clearance.

The official invoice for goods sold internationally, required for customs clearance. Must include detailed description of goods, value, currency, Incoterms, and parties involved.

An intermediary bank used to process international payments when the sender's and receiver's banks don't have a direct relationship. Each correspondent bank charges fees, increasing total transfer costs.

Two currencies quoted against each other, showing how much of one currency is needed to buy one unit of another. GBP/USD = 1.27 means £1 buys $1.27. The first currency is the "base", the second is the "quote".

The process of getting goods through customs at import/export. Requires documentation (commercial invoice, bill of lading, certificates), duty payment, and compliance with regulations. Delays = demurrage.

Charges incurred when a shipping container is not picked up from the port within the free storage period (typically 3-7 days). Costs £50-150 per container per day. Container tracking with alerts prevents demurrage.

Charges for keeping a shipping container outside the port/terminal beyond the free period. Applies after you've picked up the container but haven't returned it empty. Similar rates to demurrage (£50-150/day).

A trade finance method where banks act as intermediaries to exchange payment for shipping documents. Less secure than letters of credit but cheaper. The bank releases documents to the buyer upon payment.

Taxes imposed on imported goods by the destination country's customs authority. Rates vary by product type (HS code) and country of origin. Must be paid before goods are released from customs.

A type of regulated financial institution authorized to issue electronic money and provide payment services. EMIs in the UK are regulated by the FCA. Similar to PSPs but with specific e-money issuance rights.

The projected arrival date/time of a shipment at its destination. Critical for planning port payments, customs clearance, and warehouse operations. Container tracking provides real-time ETA updates.

Financial Conduct Authority - the UK's financial regulatory body. Authorizes and supervises payment institutions, EMIs, and other financial services firms operating in the UK.

A shipping arrangement where the shipper books an entire container (20ft or 40ft) exclusively for their cargo. More cost-effective for large shipments than LCL. Standard 40ft container holds ~25-28 CBM.

Financial Transactions and Reports Analysis Centre of Canada - Canada's financial intelligence unit. Registers and supervises MSBs (Money Services Businesses). Unicorn Currencies is FINTRAC-registered.

An Incoterm where the seller delivers goods onto the vessel at the named port. Risk transfers to buyer once goods are on board. Seller handles export clearance; buyer handles shipping, insurance, and import.

An agreement to exchange currencies at a predetermined rate on a future date. Used to lock in FX rates for upcoming payments, protecting against rate movements. Typically available 1-12 months ahead.

The grace period after a container arrives at port during which no demurrage charges apply. Typically 3-7 days depending on port and shipping line. Payment delays can cause containers to exceed free time.

The financial risk arising from holding assets or liabilities in foreign currencies. For importers, this is the risk that supplier invoices become more expensive if the foreign currency strengthens before payment.

The difference between the buy and sell price of a currency pair. Banks typically charge 2-4% spread; Unicorn Currencies offers 0.5%. On £1M, a 2% spread costs £20,000 vs £5,000 at 0.5%.

A risk management strategy to protect against adverse currency movements. Common methods include forward contracts (locking rates for future dates) and options. Essential for businesses with significant FX exposure.

Harmonized System code - a 6-10 digit number classifying traded products internationally. Used to determine duty rates and trade statistics. The first 6 digits are internationally standardized.

International Bank Account Number - a standardized format for identifying bank accounts across borders. Up to 34 characters including country code, check digits, and account number. Required for SEPA and many international transfers.

International Commercial Terms published by ICC defining responsibilities of buyers and sellers in international trade. Common terms: FOB (Free On Board), CIF (Cost, Insurance, Freight), DDP (Delivered Duty Paid).

The wholesale exchange rate at which banks trade currencies with each other. This is the true market rate, very close to the mid-market rate. Retail rates include a markup above interbank.

The verification process for business customers, including company registration, ownership structure, directors, and beneficial owners. More comprehensive than KYC for individuals.

The process of verifying the identity of customers before providing financial services. Includes ID verification, address proof, and understanding the nature of the business. Required for AML compliance.

A shipping arrangement where cargo from multiple shippers is consolidated into a single container. Cost-effective for smaller shipments but involves additional handling and potential delays at consolidation points.

A bank guarantee that payment will be made to a seller once specified conditions are met (typically proof of shipment). Reduces risk for both buyer and seller in international trade. Common in Asia-Pacific trade.

The true exchange rate between two currencies, calculated as the midpoint between buy and sell prices on global currency markets. This is the rate you see on Google or XE. Banks and brokers add their spread on top of this rate.

A bank account that can hold and transact in multiple currencies simultaneously. Eliminates the need to convert currencies for every transaction, reducing FX costs and enabling strategic rate timing.

Reducing FX exposure by matching foreign currency revenues with expenses in the same currency. For example, an exporter paid in EUR who also has EUR suppliers has a natural hedge.

An individual who holds or has held a prominent public position (government official, senior executive of state company, etc.). PEPs require enhanced due diligence due to higher corruption risk.

A preliminary invoice sent before goods are shipped, detailing the items, quantities, and agreed prices. Used for customs, applying for letters of credit, and as a formal quote. Not a demand for payment.

A regulated entity authorized to provide payment services including international transfers and currency exchange. PSPs are supervised by financial regulators (e.g., Bank of Canada) and must safeguard client funds.

A guaranteed exchange rate held for a short period (e.g., 15 seconds at Unicorn Currencies) allowing you to confirm a transaction at the quoted rate. Essential for making informed decisions without rate slippage.

The regulatory requirement for payment institutions to keep client funds separate from operational funds. Ensures client money is protected if the institution fails. Funds held in segregated accounts at tier-1 banks.

The process of checking customers and transactions against sanctions lists (OFAC, EU, UN). Ensures businesses don't transact with sanctioned individuals, entities, or countries. Done on every payment.

Single Euro Payments Area - enables euro transfers between 36 European countries as easily as domestic payments. SEPA transfers are typically same-day and low-cost compared to traditional wire transfers.

The completion of a payment transaction - when funds are actually transferred and available. Traditional bank settlement takes 1-3 days. Unicorn Currencies settles wallet-to-wallet in 2.3 seconds.

The difference between the expected exchange rate and the actual rate at which a trade is executed. Occurs when rates move between quote and execution. Rate locks prevent slippage.

The current exchange rate for immediate currency conversion (settlement within 2 business days). Contrast with forward rates which are for future settlement dates.

An 8-11 character code identifying banks globally for international wire transfers. Format: AAAABBCCDDD (bank code, country, location, branch). Required for international payments. Also called BIC.

A standard unit for measuring container capacity. One TEU = one 20-foot container. A 40-foot container = 2 TEU. Used to measure port capacity, shipping volumes, and vessel sizes.

The natural person(s) who ultimately own or control a company, typically those with 25%+ ownership or significant control. Financial institutions must identify UBOs as part of KYB.

The degree of variation in exchange rates over time. High volatility means rates are moving significantly, increasing both risk and opportunity. Emerging market currencies (TRY, ZAR, BRL) typically have higher volatility.

An electronic transfer of funds between banks, typically via SWIFT network. International wires can take 1-5 business days and incur fees at both sending and receiving banks plus intermediary fees.