Trade Finance Forum › Forums › Market Regulations › Laws and Bills › Define what double financing fraud in trade finance, as well as what precautions financial institutions take to prevent and identify it is. › Reply To: Define what double financing fraud in trade finance, as well as what precautions financial institutions take to prevent and identify it is.
Trade funding is crucial for global economic development, but fraud has been a persistent and pervasive problem affecting all parties. In the last three years, fraud in trade financing has tragically decimated the industry. In the year 2020, a number of commodity trading enterprises failed due to the utilization of double financing and getting letters of credit dependent on forged documents or related transactions. Exporter and importer organizations collude to produce a fictitious turnover to acquire credit or conduct a “”bust out”” in which both parties collect funds for the same trade and then vanish.
Banks have lost billions of dollars due to the demise of various traders based in Singapore, including Agritrade, ZenRock, and Hin Leong, as well as GP Global and Phoenix Commodities. ITFA, the international trade finance industry association, announced the foundation of the Fraud Prevention Working Group of ITFA as a subgroup of the ITFA Fintech Committee in a recent development. As part of new measures to combat illicit industry practices, the ITFA (International Trade and Forfaiting Association) plans to eliminate double financing fraud, differentiate technology suppliers, and set adequate practice requirements. In this regard, Surecomp’s crypto fingerprints to prevent fraud involving duplicate trade funds constitute an additional effort. The organization will be co-led by an unnamed global trade financial institution and the fraud prevention and detection company MonetaGo, which unveiled its invoice fingerprint approach to prevent duplicate invoice financing in India.
According to ITFA, this newly created group will engage in a cross-border endeavour to minimize duplicate financing – wherein fraudsters obtain funds many times for a single transaction – and discover relevant technology providers for its members. The ITFA has about 300 members from trade finance, export finance, credit and political risk insurance, and other relevant industries. It is headquartered in Zurich, Switzerland. Contour, MonetaGo Inc., Komgo, Mitigram AB, and Triterras are well-known ITFA members. Triterras joined the ITFA in September 2022.