Operational efficiencies in letter of credit (L/C) processing can be greatly enhanced with AI according to tech giant, Microsoft in a blog that summarises how trade finance is now undergoing rapid and fundamental change, thanks to the advent of cloud and AI technologies.

These technologies can also help detect trade-based money laundering (TBML) in L/C transactions, Microsoft's director of business development, financial services, Peter Hazou, explains in the blog.

Costly paper-based systems

Hazou considers how L/C processing is a mainstay of classical trade finance which remains paper-based to this day, with literally billions of pieces of paper circulating between parties at any given time.

Banks must examine all these documents for compliance, which the Microsoft executive points out is a costly effort requiring a skilled workforce.

Easing the burden

Microsoft says its products can help ease this burden. They leverage Microsoft Azure technologies to automate much of the work, freeing bank staff to deal with exceptions rather than the bulk of mundane examination.

Azure offers a range of cloud-based AI services and tools . These technologies enable businesses and developers to build, deploy, and scale AI-powered applications efficiently.

Tackling TBML

Microsoft Document Intelligence Read Optical Character Recognition (OCR) meanwhile dematerialises trade documents while AI algorithms spot compliance issues, detect signs of TBML, and meet other requirements to complete a transaction before payment.

According to Hazou, the result is improved quality and profitability, as well as new data insight APIs [Application Programming Interfaces] from digitised trade documentation.

Into the future

The Microsoft executive says the next wave of this process will apply semi-autonomous Agentic AI that further understands context and can complete multiple assignments digitally.

Semi-autonomous Agentic AI systems operate with a degree of independent decision-making while still requiring human oversight or intervention. They perceive environments, plan tasks, take actions, and learn from interactions, but they are designed to work alongside humans rather than fully autonomously.

5 ways that AI modernisation is transforming trade financing, by Peter Hazou, Director of Business Development, Financial Services, Microsoft, can be found here.