On Tuesday, April 12, when a solution was reported by Surecomp to further decrease the risks of duplicate trade financing fraud, the company encountered a type of fraud that had been difficult to escape from -and this has driven a few banks to cease the trade finance business altogether.
Duplicate trade financing is a fraudulent activity where the troublemakers approach two banks to fund the same invoice, exploiting data protection guidelines that keep the two banks in obscurity.
Surecomp President and CEO Guy Perry stated, “The risk cost of providing funds in this business has increased decisively, to the degree that a few banks have already left this business.”
Fighting a Rising Type of Fraud
Increasingly more fraudsters have been taking advantage of the shortcoming to the tune of millions of dollars as there is not a definite solution accessible to banks previously.
Perry explained, “Hence, it is an entryway that everyone knows about.”
It is an issue that has reduced the banks’ passion to deliver trade financing so much that it has taken steps to extend an existing stressing trade finance gap - the interest of corporates for trade finance that is not fulfilled or reviewed by banks. What’s more, small- to medium-sized businesses (SMBs) will be affected first as the trade finance gap is a great deal for exporters.
Perry explained, “If the expense of running a business increases, then generally the micro and [SMB] businesses will face an adverse situation first, as they operate with poor negotiating power and an extremely terrible or nonexistent credit rating.”
