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From fraud scandals and allegations to the Covid-19 lockdowns, 2020 was a chaotic year for trade and trade finance. We have rounded up our most popular articles from the past 12 months, which reflect the twists and turns trade faced during this time.

Having tracked click-through rates and time spent on page, we can reveal that the most popular topics that trade professionals read about are: the string of commodity finance fraud cases filed across Asia which, in some cases, caused banks to withdraw from the sector; the disruption to trade as a result of Covid-19 lockdown measures; the ways in which technology supported trade professionals amid the pandemic and how it is advancing; where diplomatic relations took a wrong turn and left trade exposed; and how sustainability continues to be a major focus for the financial sector.

Throughout 2020, GTR’s news and features that delve into these – and other – topics were viewed hundreds of thousands of times. Here is a rundown of what our readers across the globe were most interested in.

 

Commodity finance fraud

In 2020, commodity finance fraud claimed its place as the most popular topic on the GTR website, following several allegations and cases of fraudulent activity that were exposed across Asia and the Middle East.

The first sign of trouble appeared in March when Singapore-based commodities giant Agritrade International was accused of “massive, premeditated and systematic” deception by an ING court filing. Shortly afterwards, Singapore oil trader Hin Leong collapsed, marking the demise of one of Asia’s largest independent trading houses.

In the subsequent weeks, three other oil traders – ZenRock, Hontop and Sugih Energy – also found themselves at the centre of fraud allegations by lenders that feared being left out of pocket, with accusations generally focused on multiple financing.

The scandals have left banks nervous – in the case of Hin Leong for example, liabilities to banks and other creditors total around US$3.5bn. ABN Amro, whose exposure to Hin Leong was second only to HSBC, announced a complete withdrawal from the trade and commodity finance market in August. Meanwhile, Société Générale and BNP Paribas are consolidating activities or suspending business with new clients.

Elsewhere, ING announced plans to “refocus” its wholesale banking operations, including trade finance, and target a smaller number of core clients. The decision is unrelated to the recent fraud cases, according to the bank.

 

The Covid-19 pandemic

The ongoing Covid-19 pandemic continues to cause significant disruption to trade, and life. When the virus made its way around the world in the first half of 2020, global trade and trade finance flows were brought to a near standstill because of travel restrictions.

From South Africa to Europe, lockdown measures were different around the world, causing confusion and disruption to a sector that relies on open borders and just-in-time production. As such, the World Trade Organization predicted a drop in world trade of between 13% and 32% for the year.

Global demand for certain goods slumped, fueling uncertainty for exporters. Banks and governments issued various loan packages to support businesses. In some instances, SMEs struggled to access finance because of software issues – as was the case in the UK with the government-backed bounce back loan scheme. Export credit agencies also rolled out billions of dollars in support, with some taking on 100% cover of commercial and political risk. As Covid-19 squeezed corporates’ liquidity, supply chain finance (SCF) programmes surged. But concerns were raised about such programmes’ disclosure rules, as well as the conduct of corporate buyers and SCF providers.

Towards the end of 2020, Covid-19 vaccine breakthroughs were being made around the world, providing some much-needed optimism. On the back of this news, Deutsche Bank predicted that trade finance activity will return to pre-crisis levels by the middle of 2021. At the same time, the Asian Development Bank’s (ADB) trade and supply chain finance programme unveiled a US$500mn facility to support the purchase of Covid-19 vaccines and related equipment.

 

Tech to the rescue

Amid the pandemic, technology became even more vital to trade. Remote working meant that negotiations moved to Zoom, and digital solutions, such as electronic signatures and platforms which offer digitised documents, were embraced to ensure deals and papers could be virtually inked.

At the same time, more disruptive trade finance tech initiatives made progress. Contour, which is owned by eight shareholder banks, left beta in October, bringing the decentralised, digital trade finance platform into full live production. Other projects did not fare as well. In June, GTR reported that we.trade, a blockchain-based platform for open account trade, had cut around half of its workforce after struggling to secure funding from several of its member banks and one external investor.

Progress was made on standardisation efforts, including for the e-bill of lading and by the ICC’s Digital Standards Initiative, an independent entity formed with seed funding from the ADB and the government of Singapore.

Meanwhile, a new blockchain-based registry of trade finance transactions was launched with an aim to stop the fraudulent practices that have plagued Singapore’s commodities sector. The registry project is jointly led by Standard Chartered and DBS Bank and brings together 14 global financial institutions.

 

Diplomatic relations in doom 

Diplomatic relations took a downward turn in 2020, as the US and Australia took aim at China over the handling of the coronavirus outbreak, widely thought to have originated in the city of Wuhan.

Australia and China were at odds last year, following Canberra’s call for an investigation into Beijing’s management of the virus. This tiff spilled over into trade, with China imposing tariffs and blocking measures on certain commodity imports from Australia. Additionally, in November, at least 20 cargo ships carrying Australian coal were unable to dock at their destinations in China.

The same month, the US faced an historic and polarising presidential election that would see a record number of votes counted for several days, culminating in Joe Biden being declared the winner.

In Europe, a long-awaited Brexit trade deal between the UK and EU was eventually struck on December 24. The agreement, signed after nine formal rounds of negotiations, includes provisions which build upon World Trade Organization principles, facilitate trade, and address non-tariff barriers.

 

Driving sustainable investments 

Sustainability remained top of mind in 2020, as governments, banks and corporates felt the pressure to clean up their investments and supply chains, phasing out fossil fuels from their balance sheets and undertaking stricter due diligence.

The hypocrisy displayed by some governments that pledged strong domestic climate policies  while simultaneously funnelling money into overseas fossil fuel projects was brought to light. In December, the UK government, which has been widely criticised by NGOs for such activity, made the decision to end its support for overseas fossil fuel projects.

Elsewhere, governments were urged to introduce stricter due diligence requirements for financial institutions involved in timber trading, following an investigation into a deforestation scandal in Southeast Asia.

Not long after, international banks were advised to cut ties to three meat trading companies in Brazil, after a probe by Global Witness, an influential campaign group, accused the trio of contributing to deforestation in the Amazon. The report alleged that meat traders JBS, Marfrig and Minerva continue to source cattle from ranches involved in deforestation.