Financial technology solutions provider MonetaGo has launched its Trade Financing Validation Service into live production over the global Swift network, in a move welcomed by banks and industry bodies alike.

Swift and MonetaGo began testing the service during the last half of 2021 with 20 institutions in the US, the UK, Europe, Asia and Australia. During the pilot phase, participating institutions put data from bills of lading, invoices, purchase orders and warehouse receipts through MonetaGo’s Secure Financing system, which flags up instances of duplicate documents being registered or financed by more than one lender.

With the pilot complete, the service is now available to all of the over 11,000 institutions on the Swift network, a development that has elicited a strongly positive response from industry players.

“For too long, trade finance fraud has led to the reduction of financing available to legitimate borrowers, hindering the much-needed flow of capital to businesses on the road to recovery,” says Yoshisuke Maeda, general manager of the global transaction banking department at Mizuho Bank. “The universal, standardised utility being made available by Swift and MonetaGo represents an important opportunity to reverse the recent trend of banks curtailing their trade finance activities.”

“Banks with operations in multiple geographies should be interested in a tool that can be used across their locations, to streamline their processes and ensure consistency in their risk management practice,” adds Mario Utama, global head of trade at Maybank. “By adopting standards and delivering its service via Swift, MonetaGo has taken the lead to offer a fraud prevention solution to the global trade finance community.”

For global lenders, the benefits of the new service go beyond simply stamping out fraud in trade finance. Atul Jain, global co-head for trade finance and lending at Deutsche Bank, underscores its role in cementing the perception of trade finance as a “low-risk asset class that finances the real economy” – as demonstrated by the latest International Chamber of Commerce (ICC) trade register, released last week. “Technology is a critical enabler to amplify compliance and reduce risk, and to do so with meaningful efficiency gains,” he says. “By using the Swift network as a global access channel to validate trade finance transactions, banks both large and small can do their part in helping further combat global financial crime.”

“Using privacy-preserving technology to detect fraud across lenders provides the potential to unlock real benefits to industry” adds Gwynne Master, managing director of lending, trade and working capital at Lloyds Bank. “This is especially so given the significant strides in digitising trade, driving financial inclusion, and addressing continued regulatory focus on trade-based fraud and compliance. Practical solutions that use interoperable approaches, built within widely recognised standards, create a step change in the community’s ability to unlock value.”

Meanwhile, for the Asian Development Bank, which has for the past decade been tracking the mismatch between supply and demand for trade finance, the new Swift-enabled service represents a means to “further enable trust into the market”, says Steven Beck, the multilateral’s head of trade and supply chain finance, who adds that the initiative will “enable the global banking community to move up the curve to ensure global supply chains are resilient and robust”.

The launch comes following the publication of a report by the ICC UK warning that fraudulent traders are currently able to exploit gaps in banks’ knowledge to obtain finance illicitly – as seen in several recent scandals such as the collapses of Singapore-based traders Hin Leong and Agritrade, and the demise of Dubai-based Phoenix Commodities.

The report, co-authored by MonetaGo, puts the cost of these frauds to the industry at up to US$5bn per year, and makes a series of recommendations to banks, trade associations, governments and regulators on how technology could be used to strengthen the fight against trade finance fraud, including the use of “ecosystem-bridging platforms and services to detect fraudulent activities being perpetrated against multiple banks simultaneously”.

As the first third-party service in trade to be made available through the Swift API channel, the Trade Financing Validation Service is one such system.

“We warmly welcome this new Swift and MonetaGo initiative – using standards defined in the ICC Standards Toolkit – to scale value throughout the banking community and make trade an even safer asset class than it is today,” says Andrew Wilson, the ICC’s global policy director.

“The Trade Financing Validation Service, provided with MonetaGo, is a great example of how our API platform can be harnessed to provide a single solution to help banks tackle fraud and financial crime at the international level,” says Shirish Wadivkar, Swift’s head of wholesale payments and trade strategy.

By using Swift’s rails, MonetaGo’s solution is interoperable between markets, institutions and platforms, and can provide protection for all types of trade finance, ranging from documentary trade finance to financing of open account trade that includes receivables finance, payables finance, inventory finance and pre-shipment finance.

“For the first time in the history of trade finance, there is now a global standardised system to check duplicate financing,” says Neil Shonhard, CEO of MonetaGo, who adds that the company is now adding in additional authentication services, such as the ability to cross-reference trade documents against tax and customs data, to help provide greater assurance to lenders on the integrity of their financing transactions.