A senior executive at one of Asia’s biggest banks has said the $9 trillion trade finance industry needs to be digitized in order to tackle fraud, according to a Bloomberg article published on May 5.
Ng Chuey Peng, managing director and head of global commodities finance at Singapore’s Oversea-Chinese Banking Corp Ltd. (OCBC), criticized the industry’s reliance on paper receipts, and warned forgeries have become so sophisticated that can be difficult to spot fake documents.
Paper records are regularly used for everything from invoices to establishing the ownership of goods, and without them, banks are often unable to lend money to finance trades. According to Ng, the colors and watermarks used to signify that a document is legitimate are now being copied precisely by counterfeiters.
There have been several examples where banks lost millions because of forged receipts for metal and nickel, affecting big names such as Standard Chartered, Citigroup and the Australia & New Zealand Banking Group.
Although OCBC is working on technology that reduces the need for paper records in commodities trade, Ng did not specify if it was blockchain-based. She separately added:
“Blockchain, Komgo, Forcefield, Vakt, one of these will have to work to change how trade is being done. It’s a matter of time. When, I can’t tell, but I think it has to go paperless.”
In March, it emerged that several international metals companies were backing a blockchain-based solution called “Forcefield” that would increase transparency, improve responsible sourcing and give traders secure ownership of their inventory.
Vakt is backed by major oil firms and aims to eliminate unnecessary paperwork in commodity trading, while Komgo has a similar offering for the energy industry and plans to diversify into agriculture and metals.
In April, Volkswagen became the latest major manufacturer to join an IBM-powered blockchain platform designed to ensure the cobalt used in lithium-ion batteries is responsibly sourced.