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With the trade finance gap at an all-time high, some tech companies are creating novel solutions to help combat the wide-scale fraud that has challenged the sector for many years, making it a more attractive space for lenders once again. 

TFG spoke to Jesse Chenard of MonetaGo to find out more.


Reducing a bank’s risk of falling victim to fraud is one way of closing the $1.7 USD trillion trade finance gap.

Duplicate financing is a large fraud challenge for banks, and one of the key focuses MonetaGo is addressing at scale.

Aside from the impact that this has on the trade finance gap, large-scale fraud has also exposed certain vulnerabilities within the trade finance space, including the need for better tools and systems to detect and mitigate trade finance fraud. 

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Singapore

The Singapore example

Many countries are taking different approaches to tackle this issue. 

In Asia, the Association of Banks in Singapore (ABS) had launched a selective tendering process aimed at partnering with fintech companies to fight back.

TFG spoke to the company behind the winning bid, MonetaGo, to find out how they plan to help solve this persistent issue and make an impact on global fraud prevention tools and techniques.

MonetaGo is a financial technology solutions provider that creates proprietary digital platforms for financial institutions to address critical needs and unlock the value of disparate information spread across multiple organizations and data silos. 

According to Jesse Chenard, CEO of MonetaGo, one of the biggest problems is the information silos that exist between institutions. 

These prevent organisations from conducting more thorough background and credit checks before making informed trade financing decisions.

“Banks often rely on due diligence on their customers and transaction checks of the underlying trade flows to make trade financing available to their clients,” Chenard said.

“However, banks are unable to ascertain if a particular trade has been financed more than once as these checks are restricted to within that particular bank or within their bank network. 

“The information silos between different banks expose the banking industry to potentially fraudulent activities such as duplicate financing.”

To combat this, MonetaGo is working with ABS and a Singaporean fintech provider named GUUD, to build the Trade Finance Registry (TFR). 

The TFR’s aim is to mitigate the risks of duplicate financing by different bank lenders and the falsification of information supplied by borrowers. 

“Once launched, banks in Singapore will be able to perform queries on the TFR using select document information, which will be cryptographically hashed to create document fingerprints that are then pushed to MonetaGo’s global hash registry to detect matches in near real-time,” Chenard said.

“Partial matches that represent suspiciously similar transactions will be analysed by a comparison service within a confidential computing environment to return a risk classification of the matches.”

In addition to reducing fraudulent activity, TFR also provides greater confidence among banks in the integrity of their clients and their trade financing transactions.

The hope is that this will help to encourage more lenders back into the sector at a time when liquidity and greater access have never been more important.

Late last year, the Asian Development Bank (ADB) published its report on the global trade finance gap, which clocked in at $1.7 trillion, the highest since the ADB first published about the gap in 2013.

fraud

Restoring confidence

As a result of the largescale trade finance frauds in Singapore discovered in 2020, some large global trade banks chose to curtail their business or pull out of the market altogether. 

The most notable of these frauds, the Hin Leong Trading scandal, involved the use of fraudulent documents to receive financing from multiple sources for the same assets.

Since then, organisations like ABS have recognised the importance of an industry approach to solve the problem of trade finance frauds. Recognising the importance of financing to trade, there is clearly a need to restore confidence for banks to provide trade finance again. 

With the additional layer of security provided by MonetaGo’s solutions, the trust between financiers and borrowers can be strengthened as the financing transactions can be verified against fraud. 

This will help narrow the trade finance gap. 

Given time, this may spread to other parts of the world and help to stamp out this pernicious problem from the trade finance sector globally.

Interview Tackling money laundering and fraud in trade finance

Positive Knock-on Effects

MonetaGo’s previous work with SWIFT India, a financial messaging company jointly owned by global bank cooperative SWIFT and Indian banks to serve the Indian banking community, launched the Secure Financing service to commercial banks in India in 2019, and led to the creation of a Trade Financing Validation Service accessible using the SWIFT global API gateway to SWIFT’s 9000+ members in 200+ countries. 

The global service allows financial institutions worldwide to check their trade finance transactions for fraud on the system, using their SWIFT credentials, and accessing the service through SWIFT infrastructure, and provides mitigation against duplicate financing fraud not only between lenders in a domestic market but also in any other market.

The MonetaGo system is natively interoperable between markets, which is a critical design feature because borrowers may avail duplicate financing for the same trade transaction in multiple jurisdictions

Some banks are currently testing the system in pilot mode. 

Chenard said: “We are very excited to be offering Secure Financing as a global utility to trade financiers worldwide, and in doing so making trade finance more available to genuine borrowers and users, as the integrity of their transactions can be verified through our solution.”

Read the latest issue of Trade Finance Talks, July 2022