2024 has been a steady, if unremarkable, year for trade and trade finance, with modest growth in goods trade and a market that is slowly stabilising from the dual shocks of Covid and Russia’s invasion of Ukraine.
We have rounded up our most-read articles of the past 12 months, which reflect the progress made – and the obstacles faced – during this time.
Based on page views of all GTR articles since January 1, we can reveal the most popular topics of 2024 among our readers: the ongoing complexity of sanctions compliance; the growing burden of regulation across the world; the plethora of fraud cases settled, some after years in court; and the entry – and exit – of key players in the fintech market.
Ever-evolving sanctions
Trade finance banks, insurers and corporates are continuing to grapple with an increasingly complex sanctions environment, so it is of little surprise the topic was a popular one among GTR’s readership.
The US and its allies have sought to squeeze the Kremlin’s energy revenues and stifle its ability to procure goods for military purposes over its ongoing war in Ukraine, yet Russia has developed increasingly sophisticated means of evading these restrictions.
In May, researchers called for the EU to tighten sanctions on Russian fuel exports after it was found the bloc appeared to have imported Russian-origin oil products worth billions of dollars that had been re-exported from Turkey.
Direct imports of Russian petroleum have been banned in the EU since February 2023, but products are still likely finding their way to member states, according to a report published by the Centre for Research on Energy and Clean Air and the Center for the Study of Democracy.
There has also been growing concern over the so-called “shadow fleet”, with Russia having amassed a network of oil tankers that are often old and lacking in insurance cover in a bid to evade a cap of US$60 on its crude. Greenpeace has warned the fleet poses a serious risk of “environmental disaster”.
At the same time, the US has dramatically expanded the number of Russian entities subject to its secondary sanctions regime.
Experts said the move was principally aimed at financial institutions in “fence sitter” nations such as China, India, Turkey and the UAE, which are continuing to facilitate Russian imports of products such as electronics and dual-use goods in aid of Moscow’s military-industrial complex.
In the time since, Russian importers and exporters have reportedly struggled to send or receive trade payments.
In some cases, lenders have turned to the courts to seek clarity on business arrangements that pre-date Russia’s full-scale invasion of Ukraine. In mid-2024, a UK appeals court overturned a ruling against UniCredit in a closely watched sanctions case, finding that the bank was right to refuse payments under letters of credit issued before 2022.
Beyond the Russian conflict, the US has also continued to wield sanctions against militant and terrorist groups active in Africa and the Middle East.
Earlier this year, it blacklisted Dubai-headquartered Haleel Commodities and its subsidiaries in Cyprus, Kenya, Somalia and Uganda, accusing the firm of raising and laundering funds for terrorist group al-Shabaab.
Regulatory action
As the year draws to a close, many bankers are preparing – in some cases anxiously – for the start date of Basel 4 in the EU on January 1, 2025 (known as Basel 3.1 in the UK).
Banks have managed to avoid a spike in capital requirements for off-balance trade finance instruments in both the EU and the UK, although the topic has resurfaced following confusion over the status of long-term guarantees.
Credit insurance providers and the banks that use insurance to cover trade and other lending have also had to face the prospect that Basel 4 will make the product less effective as a risk mitigation tool, although policymakers in the EU are yet to make a final call.
The situation in the US was thrown into doubt even before the election of Donald Trump – partly due to his platform of shredding red tape – and regulators there look set to radically reshape or even abandon implementation of what they call Basel III endgame.
To help bolster the industry’s advocacy to regulators worldwide, the International Chamber of Commerce called for wider bank input to its annual Trade Finance Register, which it uses to try and demonstrate the low capital risks posed by the sector.
Supply chain finance and factoring providers were also pleased by the EU’s decision to water down an overhaul of the Late Payments Regulation, which would have imposed strict rules on payment terms.
However, a final version of the regulation is yet to be published and the Commission says it remains committed to helping European SMEs impacted by extended payment terms from buyers.
The EU delaying or amending bold legislative proposals was a broader theme over the year, also seen with both the corporate sustainability due diligence directive and laws on deforestation, which were delayed until late 2026.
In potentially positive regulatory moves, GTR reported that the Indian government commissioned a sweeping review of the country’s trade finance market and policies, with a particular focus on its export credit agencies and access to finance for SMEs.
UNCITRAL also made progress on a negotiable cargo document treaty, which if enacted by national governments, would give road and rail transport documents similar status to that of bills of lading and open up trade financing opportunities for other types of transport.
The ‘F’ word
As usual, the trade finance sector kept lawyers and investigators busy with a raft of litigation, disputes and warnings over fraudulent conduct targeting lenders, borrowers and investors.
Four years after family-owned Singapore oil trading firm Hin Leong collapsed, its founder OK Lim was sentenced to more than 17 years in prison for defrauding HSBC, although he is set to file an appeal.
A raft of civil lawsuits in Singapore stemming from the collapse of Hin Leong and other traders progressed during the year, including cases won by Standard Chartered and OCBC, a closely watched judgment in favour of UOB against Maersk Tankers, and a ruling that went against Banque de Commerce et de Placements.
The scope of fraud disputes in trade finance was truly global. In Hong Kong, China’s ICBC was sued by Taiwan’s CTBC Bank in a dispute that included allegations of fraud against a third party, while in London UBS won a case against a collapsed commodity trade accused of fabricating transactions. A Kazakh bank’s suit against several commodity traders faced hurdles from a court in the British Virgin Islands.
While many of the cases related to alleged conduct going back years, the International Maritime Bureau reminded trade financiers that the threat is very much present. GTR reported in December that receivables finance providers – and particularly non-bank lenders – appear to have been targeted by sophisticated networks of scammers.
In the same vein, efforts to fight various types of fraud through industry co-operation and technology continued. They included a Swift pilot on using AI to prevent cross-border payment fraud, a partnership between MonetaGo and FCI, and an International Trade and Forfaiting Association paper on invoice registries.
Challenges in commodity finance
The commodity finance market continues to evolve, with muted demand for traditional facilities prompting a change in strategy among some of the sector’s prominent lenders.
During the first half of 2024, several lenders reported a dip in utilisation of commodity finance lines.
Faced with the prospect of a hit to profitability, Rabobank’s global head of trade and commodity finance, Christine Dirringer, told an industry event in April that some banks might “ultimately just… drop out” of the market entirely.
There are several underlying reasons for this trend, not least the higher cost of borrowing as a result of increases in interest rates, which largely peaked in western economies in mid-2023.
At the same time, many lenders have opted to prioritise lending to larger commodity traders in recent years, closing their doors to many smaller and mid-sized traders in a bid to de-risk their portfolios and maximise returns.
Yet those same larger traders enjoyed a highly profitable 2022 and 2023, and according to a March paper by consultancy Oliver Wyman, have accumulated cash reserves totalling as much as US$120bn across the sector as a whole.
Industry insiders have said larger traders are therefore finding it more cost-effective to use their own cash rather than borrow, while efforts to reduce inventory and shorten asset conversion cycles have reduced demand further.
Although this shift has posed a challenge to lenders, the wider picture is nuanced.
Banks are remaining close to their large trader clients, which continue to seal multi-billion-dollar revolving capital and borrowing base facilities, often reporting oversubscription for syndicated deals.
And in some cases, banks are reconsidering their overall approach to the sector. Rabobank’s Dirringer said in April the bank is increasingly “finding places to add value for global traders”, for instance by advising on energy transition-related investments or balance sheet optimisation strategies.
One notable example is at ING Switzerland, which announced in February it was reshuffling its trade and commodity finance business, dividing its portfolio between the largest global traders and niche players seeking specialised lending services.
Executives told GTR in May that large traders were seeking greater support around activity in equity and debt capital markets, as well as renewable assets, logistics and shipping, but continuing to provide transactional finance to smaller and mid-sized firms means the bank can continue to maintain a diversified portfolio and help its customers scale.
New players and products in fintech
The trade finance technology market has grown this year, with a number of new products launched and some key players entering the sector.
In February, fintech firm Xalts acquired cash-strapped digital trade finance network Contour with the intention of “expanding its scope”, with executives telling GTR they intend to scale the company with a focus on Asia.
The same month, trade finance platform Komgo expanded its product range, creating a digital marketplace for the secondary market, which is still largely paper-based.
“The potential of the secondary market is big, but to date has largely been untapped, stuck on emails and Excel spreadsheets. Now a tool exists,” Izabela Czepirska, product manager at Komgo, said at the time.
Banks, too, have been expanding their involvement in digital trade. In October, HSBC launched SemFi, in partnership with fintech Tradeshift. The platform embeds invoice finance in digital marketplaces with dynamic credit limits, which Tradeshift’s chief executive described as “truly a world first”.
The most recent financial institution to moot entry to the world of trade is UK-based neobank Revolut. The US$45bn fintech posted a job advertisement for a head of trade finance to offer “the vision for the trade finance business from scratch”.
If the plan to launch a new division comes to fruition, it would mark the first time Revolut offered business loans of any kind.
It’s not been all roses, though. Invoice financing fintech Stenn entered administration in early December following an application from HSBC Innovation Bank, a major lender to the company.
GTR revealed Stenn’s banking facilities had been frozen by Citi, amid reports from Bloomberg and the Financial Times that the company’s backers had become concerned over potential compliance risks.
Prior to the collapse, Stenn was valued at nearly US$1bn and had deployed over US$10bn in capital since 2016, meaning it may well leave a gap in the market to be filled by newer entrants.
