SWIFT and MonetaGo have achieved an important milestone in the global fight against fraud and duplicate financing, with the live launch of the Trade Financing Validation Service provided by MonetaGo over the global SWIFT network.
“Trade finance is rightly understood to be a low-risk asset class that finances the real economy”
This is the first third party service, in trade, available through the SWIFT API channel.
Following the successful completion of the pilot phase of the Trade Financing Validation Service that saw the participation of 20 institutions across 4 continents, the service can now be accessed by all the 11000+ institutions in the SWIFT network. The participating institutions included some of the world’s largest trade finance banks, representing lenders in the US, the UK, Europe, Asia and Australia.
MonetaGo’s Secure Financing system leverages best-in-class technology to prevent duplicate financing in near real-time. Digital fingerprints of the documents used in trade finance are created by using a hashing algorithm, and these fingerprints are registered in a global hash registry which acts as a secure unified repository. If the same document is registered on the system by more than one lender, the system will flag all duplicates after the first unique instance is registered.
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During the pilot phase, which took place during the second and third quarters of 2022, participating institutions put data from bills of lading, invoices, purchase orders and warehouse receipts through the Secure Financing platform, observing the results of the duplicate financing checks which were delivered in almost instantaneously. Lenders were able to see, inter alia, what happens when duplicate documents are registered but not yet financed, when a duplicate document has been financed, and when financing of a duplicate document is cancelled.
With the launch of the system over SWIFT, the trade finance industry now has a natively global solution that is interoperable between markets, institutions, and platforms, enabling financiers to catch and stop cross-border fraud. The system comprehensively provides 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. This new integrated and interactive service will significantly improve safety in trade finance, mitigating the risk of duplicate financing, and ensuring confidence can be upheld globally in fraud mitigation.
Shirish Wadivkar, Head of Wholesale Payments and Trade Strategy at SWIFT said: “SWIFT is enabling innovation across the global financial ecosystem and all dimensions of cross-border transactions – from payments to securities to compliance. 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.”
“In recent years, the operating environment for trade finance has been characterised by uncertainty, which has led to an ever-widening trade finance gap. An initiative such as this, which further enables trust into the market, using standards to simplify engagement across banks large and small, is to be welcomed, as it will enable the global banking community to move up the curve to ensure global supply chains are resilient and robust,” says Steven Beck, Head of Trade and Supply Chain Finance at The Asian Development Bank.
“Using privacy-preserving technology to detect fraud across lenders provides the potential to unlock real benefits to industry,” says Gwynne Master, MD, Lending, Trade & Working Capital, 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 inter-operable approaches, built within widely recognised standards, create a step change in the community’s ability to unlock value.”
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“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, Global Transaction Banking Department at Mizuho Bank, Ltd. “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.”
“Trade finance is rightly understood to be a low-risk asset class that finances the real economy,” says Atul Jain, Global Co-Head for Trade Finance and Lending at Deutsche Bank. “Technology is a critical enabler to amplify compliance and reduce risk, and to do so with meaningful efficiency gains. 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.”
“A global standard approach to preventing duplicate financing in trade finance is the most sensible way,” says Mario Utama, Global Head of Trade, Maybank. “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. 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.”
“Trade is a proven means to create jobs, empower people, and generate the resources for sustainable and inclusive growth. Digitalisation is an opportunity to amplify this many times over,” says Andrew Wilson, Global Policy Director of The International Chamber of Commerce. “We know from our work across trade value chains that standards-based approaches enable the cost-effective deployment of digital solutions for companies large and small. 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.”
“FCI members account for nearly 90 per cent of the global cross-border factoring volume. We lead through connecting, educating and influencing to unlock value for our members,” says Peter Mulroy, FCI’s Secretary General. “The launch of the MonetaGo Trade Financing Validation Service over SWIFT is an example of where technology together with the financial services ecosystem can reduce the risk of multiple financing across the world.”
“Duplicate financing, through the reuse of the same documents with multiple lenders, is a hidden problem in trade finance. Many such frauds go undetected because financial institutions cannot check with each other if a transaction has been financed,” says Neil Shonhard, CEO of MonetaGo. “For the first time in the history of trade finance, there is now a global standardised system to check duplicate financing. Going further, the additional authentication services availed through the same system will provide greater assurance to lenders on the integrity of their financing transactions.”
The Trade Financing Validation Service powered by MonetaGo’s Secure Financing system is now live and can be leveraged by banks across the SWIFT network globally.
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