Shutting fraudsters out of trade
Digitalisation “an enormous opportunity to shut fraudsters out of trade and deliver billions” in savings, regulators urged in major report
The digitalisation of trade and finance systems is set to revolutionise the fight against trade fraud across the globe, a new report from the International Chamber of Commerce has stated.
The report calls for the adoption of existing technologies such as Legal Entity Identifiers (LEIs), digital ledgers, invoice number tracking, APIs between revenue departments and banks as well as regulators enabling banks to share fraud data all of which will help shut fraudsters out of the system.
These solutions are not complex. They are remarkably cheap and simple to implement but would make a tremendous difference in the fight against fraud whether that is in corporate lending, public procurement or trade.
Current trade and finance systems are too often manual and paper based when they should be using smart technology solutions. This makes quantifying the impact of fraud hugely challenging, the report warns. However, the scale of savings that could be made are vast. A 2019 FinCEN note advised that vendor impersonation alone cost US businesses US$9bn during the 2016-2019 period, and Bloomberg estimated that the potential losses to banks from trade finance fraud in Singapore from 2014 to 2020 totalled US$9.26bn.
Chris Southworth, Secretary General, ICC United Kingdom, said:
“Legacy systems, poor market coordination, regulators not being proactive enough to enable banks to share data and governments being too passive are all part of the problem in preventing fraud. The economic opportunity is huge at national and international level and the solutions are available. For any government with stretched public finances looking for economic growth, tackling fraud has to be on the list of priorities. The same solutions that prevent fraud also help tackle tax evasion. There is a real opportunity here for government and industry to work together.
This report should be a wake-up call to business and government alike to act now.”
Shutting fraudsters out of trade: Sustainable trade through digital empowerment, a report from MonetaGo and the International Chamber of Commerce United Kingdom, is available at www.c4dti.co.uk/research
 Updated Advisory on Email Compromise Fraud Schemes Targeting Vulnerable Business Processes, FinCEN Advisory, 16 July 2019. Available at: https://www.fincen.gov/sites/default/files/advisory/2019-07-16/Updated%20BEC%20Advisory%20FINAL%20508.pdf
 After $9 Billion Credit Hit, Banks Seek Trade Finance Revamp, Bloomberg, 9 July 2020. Available at: https://www.bloomberg.com/news/articles/2020-07-08/after-9-billion-credit-hit-banks-seek-trade-finance-overhaul#xj4y7vzkg
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