The CEO of trade finance digitisation provider Bolero has written an article on risk mitigation in which he says that opportunities for fraud exposed by the impacts of the coronavirus pandemic add weight to a growing body of opinion in support of the argument for paper-based trade finance to be ditched in favour of digital alternatives.
Andrew Raymond says banks struggled in 2020 with increased fraud, pandemic dislocations and long term trade frictions with China.
This has pushed risk mitigation very high up on the agenda especially when it comes to cross-border trade transactions he argues.
Raymond points out that even before coronavirus struck, a handful of well-known banks started to withdraw from financing oil and gas transactions because of the operational risk and losses they incurred.
He says the pandemic has not only caused massive disruption to trade, it has also exposed opportunities for fraud, prompting warnings from the US Attorney General, US security agencies and Interpol. Tech giant IBM has also warned how the current anxiety and economic uncertainty can create opportunities for fraud as behaviour becomes less rational.
Rapid shift to digitisation
The Bolero chief says digitisation cannot eliminate fraud, but argues that the case for digitisation is highlighted in the current uncertainty when the pandemic is still playing out and companies involved in commodity transactions focus on their core business while still requiring financing and risk mitigation.
If global trade is to recover quickly from the pandemic and address longer-term problems with trade finance, Raymond concludes that it needs to remove paper from the equation and shift rapidly to digitisation and multi-banking trade finance solutions.
Categories: Trade Based Financial crimes News