New ITFA whitepaper on dual-use goods compliance: A practical step forward, not a silver bullet - Trade Treasury Payments

On July 28, ITFA published a whitepaper focused on managing compliance risks related to the financing of defence and military goods. Released under the Financial Crime Compliance Initiative (FCCi) and accompanied by commentary from industry figures on LinkedIn, the paper enters a space that has seen no shortage of attention over the past several months.

The compliance challenges tied to military and dual-use goods are well known. So too are the shortcomings in how most institutions manage them, including inconsistent classification, unclear governance structures, and screening that relies heavily on legacy systems that lack the ability to assess risk in context. 

While the new whitepaper is not intended as a comprehensive fix, it does represent a useful step forward. More importantly, it frames the problem in operational terms, and that’s where institutional progress typically begins.

Classification as a compliance weak spot

One of the more useful aspects of the whitepaper is that it recognises the structural weakness within current classification methods. At most institutions, classification processes are under-resourced, inconsistently applied, and highly manual.

The companion FCCi paper, The Conquest of Military Dual-Use Goods Detection in Trade Finance, outlines the limitations of conventional approaches. List-based screening and keyword filtering are still the dominant tools, yet these methods are poorly suited to the task. Often, product descriptions can be inconsistent or vague, making them difficult to accurately classify, while classification codes, if available at all, are often stripped out in early transaction stages. Whether a product qualifies as dual-use frequently depends on factors that aren’t visible in standard trade documents, such as its destination, intended end-use, and the nature of the counterparty. 

The FCCi paper suggests a shift toward what it refers to as “contextual” classification. This includes using structured data and transaction metadata to assess risk with greater accuracy. It also notes the role of vendors, though stops short of recommending specific tools, opting instead to place emphasis on outcome quality, such as the ability to explain classification decisions and apply them consistently at scale.

Recognising reality, there is no suggestion that these steps will be easy to implement.  

What the ITFA Whitepaper gets right 

If the FCCi paper outlines the problem space, the whitepaper offers a response that is focused on internal structure and decision governance. The document breaks down the specific obligations that arise when financing goods subject to military and dual-use controls, and then maps those obligations to practical control points within the transaction lifecycle.

One of the more notable elements is the emphasis on role clarity. The whitepaper makes the case that classification must have clear ownership, ideally embedded early in the transaction process and connected to compliance, credit, or operational risk teams with the mandate to escalate uncertainty. This is especially important in cases where the classification is unclear, or where product, geography, and counterparty risks interact in less obvious ways.

The document also provides a straightforward governance structure. It sets out how institutions might assign responsibility, document decisions, and implement control testing across different teams. These are not novel ideas, but their inclusion is a promising sign that classification risk is now being treated as a governance issue, not just a policy one.

Another point in the paper’s favour is its recognition that not all institutions operate at the same level of maturity. Rather than naively proposing a universal checklist, it suggests a framework that can be adapted based on individual factors such as geography, business model, and internal capacity. This agile recommendation should help to avoid the trap of over-prescription, which is an all-too-common way to write guidance that never gets implemented.

What’s left open, deliberately or not, is the question of resource alignment. Building a defensible classification capability requires data integration, process mapping, and often cross-functional investment. The whitepaper doesn’t offer direction on this front, but it does create space for those conversations to take place.

Taken together, the two documents offer a more structured view of compliance than is typically available in this area. 

Fewer headlines, more action

The compliance burden tied to military and dual-use goods is not new, but the expectations around how it is managed are rising. Regulators are looking for clearer governance, stronger classification logic, and more reliable documentation. Institutions that rely on ad hoc processes or thin screening models are at risk of finding themselves more exposed than better-prepared competitors.

ITFA’s whitepaper does not resolve these challenges, but it does lay out a framework for addressing them that is clear enough to follow, and flexible enough to implement. For trade finance teams, it should be used less as a discussion piece and more as an implementation prompt. Read the paper. Identify the gaps. Start building.