SWIFT partners with MonetaGo to combat trade finance fraud

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.

How does this service prevent fraud over the SWIFT network?

MonetaGo’s Secure Financing system leverages 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.

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, among others, 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.

Tackling financial crime through innovation

SWIFT’s officials explained their network 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 an example of how their 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, say representatives from The Asian Development Bank. 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.

Commenting on the development, heads of Mizuho Bank stated that 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. 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.

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.