ITFA Introduced New Fraud Prevention Working Group in Trade Finance

ITFA, the global trade finance industry body is pleased to announce the establishment of the ITFA Fraud Prevention Working Group as a part of the ITFA’s Fintech Committee with an agenda of curbing a significant risk issue in the industry. 

The International Trade and Forfaiting Association, ie. ITFA is all set to initiate endeavors to remove double financing fraud, distinguish technology providers, and create sufficient practice rules, as part of new strategies to address unlawful practices in the sector. 

In a recent declaration, ITFA states it is creating a working group to resolve fraud in trade finance, which it says remains “a huge risk issue in our industry.” Surecomp’s cryptographic fingerprints to combat duplicate trade financing fraud is also an initiative in this regard.

“Fraud remains extensive, and affects both lending institutions and the people, organizations, and societies they provide services to.” The association says.

The group will be co-led by a global trade bank, which hasn’t been yet announced, and fraud identification, and prevention organization MonetaGo which announced MonetaGo’s invoice fingerprint system to prevent duplicate financing of invoices in India.

The association also strategies to build best practice guidelines for financial institutions engaged in trade and working capital finance, as well as create a classification of fraud risk typologies and bring awareness of the risks within the industry. 

ITFA says that this created group will also tackle a cross-border endeavor to remove double financing - where fraudsters get funding more than once for a single trade transaction - and distinguish suitable technology vendors for members to operate with. 

Trade finance is a vital factor for global economic development, but fraud has been a constant and extensive risk that affects everyone involved. ” Said Neil Shonhard, chief executive of MonetaGo.

“Handling this issue benefits from cooperation, and standardization on a worldwide scale, and as such we appreciate this industry-wide initiative, which demonstrates a significant step towards in the fight against financial fraud.”

Trade and working capital finance fraud have ruined the industry over the past three years. In 2020, a line of companies collapsed in the commodity trading sector revealing extensive use of double financing as well as getting letters of credit based on forged documents or related-party trades.

The fall of several Singapore-based traders, including Hin Leong, Agritrade, and ZenRock – along with the downfall of UAE-based Phoenix Commodities and GP Global - have caused bank losses worth billions of dollars.

In the working capital finance sector, the UK’s Serious Fraud Office keeps on evaluating Greensill and the GFG Alliance, a network of organizations associated with metals tycoon Sanjeev Gupta, over allegations that invoices underlying receivables finance arrangements were not genuine. 

Since then, trading giant Trafigura exposed that it could lose more than half a billion dollars to an accused fraud scheme carried out by metals traders associated with businessman Prateek Gupta.

The ITFA working group will become part of the association’s fintech committee, administered by André Casterman. 

Industry-wise cooperation is exceptionally complicated, Casterman states, and the committee will use its experience in standardizing distribution within the sector, as well as a 2020 endeavor on digital negotiable instruments

“We are now currently incorporating our proven strategy to bring collaboration amongst fintech engaged in aiding banks to prevent fraud,” Casterman states. “Here also, banks will be the definitive recipients of such work and are welcome to join the new working group. ”

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