Trade Finance Forum › Forums › Market Regulations › Risk Analysis › Is it possible for fraudsters to be shut out of the trade finance industry? › Reply To: Is it possible for fraudsters to be shut out of the trade finance industry?
Fraud has many faces and is hard to figure out. There are many ways that fraud can happen in international trade. Some of the most common ways to do this are:
1. Multiple financing is when a business finances the same trade with more than one bank in more than one country.
2. Fraudulent documents happen when a company changes or makes up a fake document that doesn’t show what the real trade is.
3. Fraudulent legal entities are when bad people make fake companies to get around financing terrorism.
Vendor impersonation is when a fraudster convinces a company that a supplier has changed bank accounts so that they can get paid themselves.
4.Fraudulent diversion of funds is when money is put into a common case collection account, but then it is taken out and used for something else.
Industry regulators know that fraud is a problem, but they can’t say how big it is. Estimates say it could be as much as 1% of the value of all transactions. Even though the effects are wide-ranging and could be widespread, digitalizing trade may be the key to a future without fraud.