While commodity finance players have been rocked by the effects of Covid-19, the oil price crash and fraud cases in Singapore, business is reportedly booming for blockchain platforms that target the sector. But to what extent can these technology solutions combat fraud, and will the decision by key banks to limit their exposure, or even exit commodity finance altogether, limit their potential to reform the industry? Felix Thompson reports.


From the large banks left exposed to fraud in Singapore to the smaller traders left struggling to access financing, various players felt the pinch in the commodity finance sector last year.

Yet, throughout all the turmoil, which was compounded by the pandemic, one type of participant in the commodity finance space seems to have gained ground in an otherwise harsh and unpredictable year for the industry.

Three of the established commodity finance specialist blockchain platforms – Komgo, Vakt and dltledgers – have all confirmed to GTR that business continued to grow during 2020 despite the wider tumult in the sector.

Komgo CEO Souleïma Baddi tells GTR that monthly letter of credit (LC) and standby letter of credit (SBLC) transactions “almost doubled” last year.

A spokesperson for dltledgers says that the number of customers on the platform rose by 50% in the first 11 months of 2020, while the volume of transactions also grew roughly 30% from 2019 levels.

While Vakt could not disclose details of transaction volumes, the platform’s chief commercial officer Stephanie Trabia says that it has gained more “traction” and will bring in new customers after launching in its second market – the Amsterdam-Rotterdam-Antwerp (ARA) barges market for oil trade.

The optimism suggests that, much like in the trade finance space, commodity-focused blockchain platforms have benefited from a wider swing towards digitalisation among corporates and financial institutions.

For Farooq Siddiqi, co-CEO of dltledgers, the rise in interest in blockchain platforms was part of a broader surge towards digitalisation driven by the pandemic, as banks scrabbled to find ways to complete trade transactions remotely following Covid-19 lockdown measures implemented across the globe.

Yet Siddiqi also points to fraud as another key driver. “With any economic crisis, fraud typically picks up. That’s the nature of the beast. People have naturally taken more seriously any platform that appears to reduce risk.”

Fraud scandals streamed out of Singapore on a worryingly regular basis last year, with commodities giant Agritrade the first to fall in March amid accusations of “massive, premeditated and systematic” deception, according to an ING court filing.

One of Asia’s largest independent trading houses collapsed soon after, with Hin Leong’s exposure to banks and other lenders estimated to stand at around US$3.5bn at the time. Soon after that, three oil traders – ZenRock, Hontop and Sugih Energy – were all also accused of fraud by lenders.

Details have varied, but a common thread linking the various cases has been the use of multiple financing fraud, where banks are tricked into providing finance for the same trade transaction. Some traders are alleged to have even fabricated cargo – or claimed cargo that wasn’t their own – to obtain funding.

These kinds of fraud can be mitigated by digital platforms such as Komgo, Baddi says, with the company having released a new product in response to the fraud scandals.

The solution, known as trakk, works to minimise fraud and falsification risks by allowing users to stamp, trace and authenticate digital documents. Through stamping, users can sign specific activities on a document such as ‘certify’ or ‘finance’, a process which Komgo says builds a unique and immutable audit trail behind digital documents. Anyone who has access to the particular document can verify its authenticity and audit trail via an outlook plug-in or Komgo’s website.

Pointing to double or triple financing fraud, where traders were pledging collateral to banks that had already been pledged elsewhere, Baddi notes: “This was brought about because you don’t have the visibility on a trade document, like a bill of lading, and what happens to it.”

She says that trakk can also combat attempts to defraud through invoices, adding: “There’s been a couple of cases recently of fraudulent invoices. Emails get hacked, the document is intercepted, or the bank account details are changed, for example, and fraudulent payments are then made. Again, we’re resolving that issue. We already know of at least one case where a trakked invoice has prevented the buyer from losing money from a fraudulent payment.”

dltledgers also says that by doing away with paper-based processes and providing greater visibility to transactions, its platform represents a “major step forward” in mitigating the risk of fraud for finance providers.


Blockchain not the whole answer

Although promising for the industry, there are still concerns that wider reforms are required and that standards for electronic documents would need to be unified for blockchain platforms to be effective in tackling fraud.

“For preventing fraud from happening, you would have to have the bank, the trading community and all the ecosystem participants to validate electronic documents, such as the electronic bill of lading (eBL),” Vakt’s Trabia says.

Law firm Norton Rose Fulbright has also talked up the potential for eBLs to tackle fraud, and points out in a November 2020 blog post that fraudsters involved in recent scandals have used fake bills of lading to obtain multiple financings for the same cargo.

eBLs are one potential solution in mitigating bill of lading fraud risks, it adds, as “the transparency and traceability of electronic bills of lading platforms makes it much more difficult for certain types of bill of lading fraud (such as by issuing fake duplicates) to be successfully carried out”.

However, the eBL currently makes up just 0.1% of all bill of lading issuances, according to calculations by the Digital Container Shipping Association (DCSA), with the lack of legal recognition of eBLs as a document of title in many jurisdictions remaining a sticking point to wider adoption.

“If somewhere in the supply chain a party is not a user of the electronic system, a paper bill will still eventually need to be issued, which to some extent negates the benefits associated with the electronic system,” adds Norton Rose Fulbright.

To tackle this problem, the ICC’s Digital Standards Initiative and the Asian Development Bank have both advocated for governments to adopt the United Nations Commission on International Trade Law (UNCITRAL) model law on electronic transfer records.

Such a move would enable the legal use of electronic transferable documents, including bills of lading, bills of exchange, promissory notes and warehouse receipts, both domestically and across borders.

Meanwhile, the DCSA has recently developed a series of data and process standards for the eBL, as part of a drive to unify the disparate formats that currently exist, in order to streamline acceptance by regulators, shippers and other players in trade.

But despite these efforts on the digital front, it’s clear there won’t be a short-term fix for the problems currently facing the commodity finance sector.

Major banks have already decided to cut their losses, with ABN Amro winding down its trade and commodity financing activities, and now also weighing up whether or not to continue its participation in Komgo, according to a spokesperson from the bank.

In the meantime, a group of 14 banks led by Standard Chartered and DBS Bank are attempting to launch a trade finance registry in Singapore in a bid to put a stop to fraudulent practices.

The registry intends to act as a “secure central database for the banking industry to access records of trade transactions financed across banks in Singapore”, the two banks say in a joint statement. It aims to allow banks to validate whether another lender has already submitted a particular title instrument for financing purposes, which should – in theory – eliminate multiple financing fraud where the same underlying documents are used more than once.

The scope of the registry project – which ran a proof of concept in 2020 using dltledgers’ technology – has been questioned for focusing only on banks, rather than bringing in other players in the trade ecosystem, such as shipping companies and traders.

Sriram Muthukrishnan, global head of trade product management at DBS Bank, acknowledged to GTR in October that there is “still much more to be done”, though he said that the future roadmap envisages the involvement of other key industry participants.


Platform profiles


Vakt is a commodity-focused blockchain platform that went live in November 2018, with the aim of digitalising post-trade management processes.

The Quorum-powered platform allows various players in the trade ecosystem – including traders, banks, surveyors and terminals – to manage physical energy transactions, from trade entry to final settlement.

The idea is that it will eliminate time-consuming reconciliation and paper-based processes, with the platform helping with the communication of deal details, confirmations, contracts, logistics and invoicing between the various parties.

Vakt was initially only used by a handful of its shareholders in the BFOET (Brent, Forties, Oseberg, Ekofisk and Troll) crude oil trade market, including BP, Equinor, Shell, Gunvor and Mercuria. Other shareholders include Koch Supply & Trading and banks ABN Amro, ING and Société Générale.

But Trabia tells GTR that more than half of the roughly 20 participants engaged in BFOET oil trade are now on the platform, which in November expanded into the ARA (Amsterdam, Rotterdam, Antwerp) barges market.

Meanwhile, new shareholders have joined Vakt in the past couple of years. Chevron, Total and Reliance Industries all signed on in January 2018, and a year later Saudi Aramco joined the platform with a US$5mn investment.

Trabia points out that the Vakt platform isn’t a trade finance platform in and of itself, but has been closely linked to Komgo – a blockchain-based platform that digitises trade and commodity finance products – since day one.

Previously, Vakt users had been able to access financing from lenders registered on the Komgo platform. Users could request trade finance via Vakt and obtain various quotes from Komgo before making their selection and then attaching that to their cargo on Vakt.

Vakt is now planning on letting its users access trade finance from “any” financing platform or bank directly through a new API link it is releasing in Q1, she says.

When the functionality goes live, Vakt users will be able to send details of a transaction – such as an LC – to a lender via the API link. The bank would then decide whether to provide financing, and communicate this via the link.

Vakt is in discussions with Komgo, Contour and “three or four banks” about connecting to this new solution, Trabia says, though notes that talks have been broken off with financial institutions who have exited the commodity finance market in recent months.

Vakt also has plans to expand into sectors beyond oil, and will likely branch into gas and power next, Trabia adds.



Swiss-based Komgo was founded as an independent entity in August 2018 to digitalise the commodity trade finance sector.

With backing from 15 shareholders made up of a mix of corporates and banks, Komgo went live within months, delivering its first LC transaction in December that year.

In the time since, the platform has launched four separate products.

One of these, known as konsole, allows banks and corporates to manage all their trade finance exchanges in one place. It covers a wide range of functionality, including LCs, SBLCs, documentary collections and guarantees.

Another product, market, allows users to manage all risk cover, confirmation, discounting and treasury activities with multiple banks.

The platform’s know your customer (KYC) product, known as check, aims to simplify the onboarding and renewal process by bringing all KYC exchanges and documentation into one system, while also reducing manual touch points by automating data collection and integration with other systems.

The fourth product, trakk, works to minimise fraud and falsification risks, by allowing users to stamp, trace and authenticate digital documents.

ABN Amro, BNP Paribas, Citi, Crédit Agricole, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG, Natixis, Rabobank, Shell, SGS and Société Générale and Total are all backers of the platform, though there are doubts about the continued involvement of ABN Amro as a shareholder.

The bank has announced it is winding down all commodity trade finance activity and is weighing up whether to continue as a backer of Komgo. “We are considering our options,” a spokesperson for ABN Amro tells GTR.

BNP Paribas, too, announced in August that it had suspended all new commodity trade finance deals pending a review of its activities in Europe, the Middle East and Africa. A month later, the bank said it would shut its Swiss commodity trade finance business.

Baddi tells GTR that the growing number of transactions the platform is seeing outweigh any reduction in volumes that may have been caused by banks pulling back from the commodity finance sector.

She adds that the platform has started to expand its client base to trade finance users outside of the commodities sector as well.



Headquartered in Singapore, the dltledgers blockchain platform for commodity trade finance launched in early 2018 with a focus on the Asia Pacific region.

The platform, which is based on Hyperledger Fabric, lets companies manage trade documents and message from a single interface, while also allowing firms to compare and negotiate trade finance options from multiple lenders, before signing terms.

The companies can then track the status of contracts, documents, goods and payments in real time on the platform.

Banks and other trade finance providers, meanwhile, can offer instant trade financing support through the platform, which facilitates LC transactions and supply chain financing. All parties have full visibility over a transaction they are involved in.

dltledger’s Siddiqi notes that the platform has benefitted from the wider trend towards digitisation in the trade finance space.

“Directionally, it’s all positive. We’ve got roughly 400 commodity traders, 20-plus large corporates, and 45 banks signed up,” he says.

The platform is eyeing regional growth too. It has now launched in India and the Middle East, and signed a joint venture in Japan.

Last year also saw dltledgers help develop a new trade finance registry in Singapore, with the platform serving as a technology partner for the project.

Siddiqi tells GTR that the project has recently moved beyond the proof of concept (PoC) phase, and that dltledgers has now passed control of the registry to the Association of Banks in Singapore (ABS), who will own and administer the database.

ABS is now preparing a request for proposal for the actual build of the registry, a dltledgers spokesperson explains. “Hopefully we’ll have an advantage, seeing as we completed the PoC,” they add.