“The pandemic has unearthed numerous frauds that rocked the trade ecosystem,” was the opening message from Ben Arber (managing director, Monetago) on day one of Sibos in Amsterdam.
The session, 'digitising trade: the time is now to collaborate', and moderated by Gonzalo Perez Verdicchio (product manager chapter lead, SWIFT) was advertised as providing detailed knowledge to help trade digitisation scale through collaboration.
“The trade ecosystem is vast, the challenges are plentiful and inefficiencies can have far-reaching consequences,” read the session’s synopsis, and “the pandemic unearthed numerous frauds that rocked the trade ecosystem, prompting banks and regulators alike to react.”
Fraud in trade finance
Arber stated that fraud in trade and receivable finances is “endemic” and “longstanding”. “Fraud has been in the commodity space, has been in Asia, Europe, North America and other markets worldwide”, claimed Arber, who also referenced different types of fraud, including multiproduct under LSs, guarantees, collections, basic invoice discounting fraud, receivable finance fraud and supply chain fraud. “They’re all impacting global corporates and, therefore, banks that lose together with domestic frauds, which tend to fly under the radar,” asserted Arber.
The fraud typologies
Arber told audience members that there is fraud targeting companies using fake documents, fake invoices, altering bills of lading and duplicate financing. “There is also collateral fraud using non-existent collateral,” commented Arber.
Arber elucidated broader typologies between buyers and suppliers impacting more than just banks. “There are vendor scams where companies are tricked into paying regular vendors,” he said, with “more sophisticated use of technology, including hacking into supplier platforms to create putatively-genuine invoices.” These are not victimless crimes, asserted Arber, since they impact people and economies across the globe.
Arber singled out a date-driven standardised ecosystem approach as a potential solution. “The technology exists already where multiple financial institutions, for example, share information on trade transactions and entities – both clients and non-clients, allowing to identify potential duplicate financing,” he said.
Arber also told audience members that using vast amounts of data provided by government regulators, custom agencies, plus the private sector, to identify whether a document is genuine or fake is another “important” possibility.
“There is a growing need for banks, private companies, trade associations and regulators to collaborate together,” stated Arber, and a “growing need” to build registries centralised by market and region.
Arber also explained his hope that there will be the ability to identify fraudulent flows through broader collaboration.
The importance of collaboration
Arber described the impact fraud has had on markets, governments, banks and market regulators. “The proof is there that amount of information from trade documents from banks shared via a centralised registry means you’ve not got digital islands and individual groups of data”, stressed Arber. The result is that you can collaborate cross-border globally to identify flows which look fraudulent between buyers and suppliers across markets, claimed Arber.
Cloud computing was also singled out, which can “power” the ability to take vast amounts of data at a document level into cross-border type platforms. “Regulation is encouraging this type of approach,” he added.
Arber referenced the anti- laundering Act 2020 in the US as having provisions for technology and for sensitive information sharing, including suspicious activity reports between institutions and cross-border outside the US regulations, as driving some of this change towards a more collaborative and digital approach to “solving problems like fraud and broader problems from a financial crime perspective in the trade and receivables industry.”
The session can now be watched on-demand here.
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