B2B Payments

OCBC Bank Says Fraud Is Pushing Digital Trade Finance

Rampant fraud in the global trade finance space is forcing the industry to go digital, according to Asia’s second-largest lender, OCBC. The Singapore bank’s Managing Director and Head of Global Commodities Finance Ng Chuey Peng told Bloomberg that “trade finance is due for a transformation,” reports said Monday (May 6).

“Going paperless has to happen,” she added.

The publication noted that the current global trade financing space is worth about $9 trillion, though much of that continues to rely on paper documents. As banks experiment with emerging technologies like blockchain, many players are beginning to digitize and automate key processes in the trade finance market, including invoices, inspection certifications, customs documents, bills of lading, warehouse receipts, and other pieces of information required to process and finance trade deals.

According to Ng, fraud continues to be widespread, with forged documents often “so good that you can’t tell the difference. The color, the watermark, is exactly like the original.”

Another expert, TradeCloud Co-founder Simon Collins, said fraudsters rely on the trade finance market’s continued use of paper to commit their crimes.

“These paper documents are open to manipulation in various ways,” he told the publication. “This is high-risk, given the large transaction size in the commodities industry. Digitalization, with a high level of security, can significantly reduce these risks.”

Bloomberg highlighted some recent high-profile trade finance scams that took advantage of the market’s ongoing use of paper documents. One involved Standard Chartered and Citigroup, which lost millions of dollars in 2014 as a result of fraudulent warehouse receipts. Fraudsters used those receipts for metal, held at a port in China, to raise trade finance multiple times. ANZ also experienced losses two years ago in a similar scam involving nickel, report said.

Now, Standard Chartered, Citigroup, ANZ and four additional lenders are piloting a new initiative to combat trade finance fraud by promoting data sharing on small companies that seek trade finance. The OCBC is also collaborating on projects “that leverage technology in order to reduce the use of paper in commodities trade finance,” Ng said, though she declined to offer specific details on the initiative.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.