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Data science startup Duality Technologies is setting its sights on solving the trade finance fraud problem with a new secure data collaboration application, GTR can reveal.

Founded in 2016, the company offers privacy-enhancing applications for a variety of uses in regulated industries, such as financial, healthcare and government services. Among its clients, it counts the US Department of Defense’s research and development arm, the Defense Advanced Research Projects Agency, as well as Intel and Oracle.

“We have built a general data science and collaboration platform that has privacy built into it from the start. This enables organisations to collaborate on sensitive data while ensuring regulatory compliance,” Ronen Cohen, vice-president of strategy at Duality, tells GTR, adding that the solution naturally lends itself to collaboration in the fight against trade finance fraud.

“We’ve been doing a lot of this sort of work in fraud and money laundering,” he says. “Now, in trade financing, specifically, we’ve been looking at the duplication problem. Collaboration is critical in detecting this type of crime, and if financial institutions could have the privacy and security guarantees that ensure the protection of their data and customers, as well as regulatory compliance, they would be more open to sharing information. Our platform is enabling this in ways that have not previously been possible.”

The battlefield in the war against duplicate finance fraud has become increasingly crowded of late, as the industry scrambles to defend against a repeat of the high-profile scandals of 2020. In April, Toronto-based tech firm Surecomp launched an invoice comparison tool to identify suspicious activity, while financial technology solutions provider MonetaGo has linked its trade finance fraud prevention system to Swift’s API-enabled infrastructure to enable financial institutions to check for duplications of invoices, bills of lading, warehouse receipts and purchase orders.

Those two solutions use hashing to create digital fingerprints of documents that can then be compared in order for matches, or near matches, to be identified.

What makes Duality’s solution different, Cohen says, is its use of homomorphic encryption, which allow functions to be performed on data while it’s still encrypted.

“Hashing is a very different security model. With hashing, you can look at exact or near matches, but you can’t do computations. You can’t run a machine learning model on hashes, you can’t run queries on hashes. With homomorphic encryption, we’re doing something that allows you to actually do those types of more complicated computations.”

In practice, what this means is that, using Duality’s solution, lenders can receive alerts when a funding request has already been financed – without revealing the identity of the entity making the request – and then continue to collaborate to understand risk indicators, transaction patterns, and other critical information used in lending decisions.

“Banks can ask questions of others via a central hub and get an automated response, all without revealing the subject. They won’t know how each other answered, but will know the holistic aggregate network level response. In this way, we’re preserving privacy and confidentiality the whole way through and anonymising customer relationships. Organisations can share things like transaction patterns, customer information, potentially even competitive information, because they’re not actually sharing the underlying data,” says Cohen.

Although Duality is entering an increasingly competitive market, the company says that its technology is interoperable with that of others. “Our solution is based on open source and standardised security, and anyone can use it. It’s not necessarily competitive, but rather complimentary to other types of solutions,” says Cohen.

The success of any trade finance fraud solution depends on the network effect – given fraudulent actors can present documents for financing at a sizeable number of banks, all of these ideally need to be on the same platform. Duality, which has already integrated its capabilities within multinational tech firm Oracle’s financial crime and compliance management product suite, says that it will leverage its existing partnerships to gain scale.

Initially, the company is focusing on launching its solution in Asia, engaging with institutions that have experienced “sizeable losses” due to trade finance fraud.