B2B Payments

Trade Fraud Is 'Ground Zero' For Banks And Blockchain

Banks may not always be up for overhauling their operations with a largely untested, disruptive technology, but new reports suggest the threat of fraud in one area of corporate finance is encouraging financial institutions to adopt distributed ledger technology in growing volumes.

Reports by Bloomberg on Sunday (May 22) said banks are examining ways to protect themselves against fraud in the trade finance sector, worth $4 trillion in today's market.

Standard Chartered and DBS Group Holdings have taken on the latest initiative in this area through the development of a digital eInvoicing ledger platform. Reports compare the solution to the blockchain, which underwrites bitcoin.

According to reports, Standard Chartered was hit with a cyberattack and lost $200 million because of a breach at China's Qingdao port. Reports said businessmen used invoices for the same order multiple times to access hundreds of millions of dollars worth of trade finance from financial institutions.

"Invoices should be considered a leading candidate here, given the high potential for fraud," said Henry Balani, global head of strategic affairs at anti-money laundering service provider Accuity, in reference to blockchain applications.

Another expert, an executive at DBS spearheading the coordination with Standard Chartered over the distributed ledger project, explained why trade finance is so vulnerable to fraud.

"Because there is no common platform for banks to screen transactions financed by other banks due to confidentiality concerns, there is a possibility that customers may capitalize on this information-sharing gap to obtain financing from multiple banks using the same invoices," said Lum Yin Fong.

The International Chamber of Commerce conducted a survey in 2015 that found nearly one in five financial institutions cited an increase in trade fraud allegations, reports said.

With more banks experimenting with blockchain technology, reports said invoice and trade financing may emerge as "ground zero," the publication said, for adoption of real-world blockchain solutions.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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