Singapore goes live with anti-fraud registry to eliminate duplicate financing

From Global Trade Review (GTR)

A long-awaited initiative to stamp out double financing fraud in global trade hub Singapore is now live, enabling banks to share information to check if a transaction has already been funded before agreeing to finance it.

Launched at the Association of Banks in Singapore’s (ABS) 50th anniversary event on June 23, the Trade Finance Registry (TFR) serves as a secure database for records of trade transactions financed across foreign and local banking institutions in Singapore.

Using the registry, which has been developed by financial technology provider MonetaGo, banks can perform queries on select document information, which is hashed to create electronic fingerprints that are then pushed to MonetaGo’s secure, unified data repository to detect double financing attempts in near real time.

“The Association of Banks in Singapore, together with their member banks, are pioneering an innovative digital solution for a Trade Finance Registry which would mitigate duplicate financing within the banking industry and instils confidence amongst financiers and borrowers,” says Ai Boon Ong, director of the ABS.

“MonetaGo was selected for its expertise and proficiency in fraud prevention technology, which includes the utilisation of their global hash registry system and decision tree logic. The use of privacy-preserving techniques has enabled MonetaGo to tackle the challenge of information silos and competitive concerns among banks while enabling the sharing of crucial information. Its innovative approach to solving complex problems has been clearly demonstrated in the development and deployment of this industry utility,” she adds.

Singapore’s TFR has been three years in the making.

Catalysed by the string of high-profile company collapses and accusations of fraud in 2020 that left banks wary of providing finance to the city-state’s commodity trade sector, an initial project, jointly led by Standard Chartered and DBS Bank, brought together a total of 14 international financial institutions along with ABS and government innovation agency Enterprise Singapore. A pilot – built on a platform developed by Singapore-based technology firm dltledgers – was carried out in June that year, although some onlookers expressed scepticism to GTR as to its utility.

One of the questions raised was its ability to authenticate the validity of trades – a key concern in light of the Hin Leong scandal, in which the trader was accused not only of obtaining financing from multiple banks for the same trade, but also of financing the sale of cargo that did not exist at all.

Similar allegations arose at several other of Singapore’s trading houses, including ZenRock, Sugih Energy and Hontop Energy, with banks claiming trade transactions were fabricated so those companies could obtain liquidity.

Last year, following a tender process by ABS, MonetaGo became the registry’s new technology provider.

Created in partnership with Singaporean financial technology provider GUUD, which is providing the user interface, the new TFR connects to the global hash registry of MonetaGo’s Secure Financing solution, which not only checks for full or partial matches, but also connects to trusted sources of information – such as tax authorities – to validate trade data, allowing financiers to ensure that the underlying transaction is genuine.

Speaking to GTR, Neil Shonhard, CEO of MonetaGo, says: “Duplicate financing prevention, one of the core capabilities that MonetaGo specialises in, has been recognised as an issue of national importance in Singapore. We laud the ABS for its foresight to provide its members a solution that detects duplicate financing, not only domestically, but across national borders, made possible through the use of MonetaGo’s global hash registry, which compares document hashes worldwide in a privacy-preserving way.”

The TFR is the latest in a series of global initiatives to tackle the pervasive issue of double financing fraud, which has cost the trade finance industry billions of dollars in recent years.

In February, the UK’s trade finance banks joined forces with the International Chamber of Commerce United Kingdom (ICC UK) to deliver on recommendations laid out in a 2022 whitepaper, including the adoption of digital tools to shut fraudsters out of trade. The project is being spearheaded by the Centre for Digital Trade and Innovation (C4DTI) in partnership with MonetaGo and is tipped to be delivered by the end of 2023. According to the C4DTI, this will make the UK the first G7 economy to tackle this issue, saving “hundreds of millions of pounds” in lost funding that can be better spent facilitating real trade transactions.

Meanwhile, a month later, the International Trade and Forfaiting Association (ITFA) convened an anti-fraud working group to fight illicit activity in the sector. Co-chaired by MonetaGo, the group is currently working on best practice guidelines for financial institutions involved in trade and working capital finance, as well as creating a taxonomy of fraud risk typologies to raise awareness of the risks within the industry.

“Thanks to the trust and confidence of financial institutions and partners from around the world, the MonetaGo system is preventing duplicate financing and document fraud on a global basis,” says Shonhard.

MonetaGo’s system has been in live production since 2018, and since then the company says it has processed over 4 million transactions. Last year, it was made available to the over 11,000 institutions on the Swift network through Swift’s API-enabled infrastructure.