Singapore's DBS Bank and the UK's Standard Chartered are leading an industry workgroup including 12 other banks to develop a Trade Finance Registry (TFR) pilot with the aim of enhancing trade transparency in Singapore.

The establishment of the blockchain-based registry comes in the wake of the collapse of several oil trading companies, many of them Singaporean, earlier this year and revelations that letters of credit (L/Cs) appear to have been used fraudulently on several occasions by the failed oil traders.

TFR aims

The government-backed TFR, which is still at the proof-of-concept (POC) stage, is supported by Enterprise Singapore and endorsed by the Association of Banks in Singapore.

It will allow participants to access records of commodity trade transactions financed by banks in Singapore and aims to be an industry utility by serving as a secure central database for the banking industry to access records of trade transactions financed across banks in Singapore.

This mitigates against duplicate financing from different bank lenders for the same trade inventory, and aims to lead to greater trust and confidence among banks and traders alike.

L/C connections

There are several indications of possible L/C abuse by the failed traders. Court filings revealed that Singaporean traders Hin Leong, Zenrock Commodities and Hontop allegedly used a single L/C to finance multiple cargoes, or secured financing for cargoes that did not exist.

PwC, Hin Leong's judicial manager said earlier this year there were deals involving at least 18 L/Cs worth about US$503 million opened by Hin Leong to purchase cargoes that were immediately sold back to the seller (DC World News, 9 October 2020).

Bank cooperation

Developed on a blockchain network supported by technology provider dltledgers, DBS and Standard Chartered scoped and developed the POC in the span of three months, with the support of 12 other banks.

The other 12 participating banks were ABN AMRO, ANZ, CIMB, Deutsche Bank, ICICI, Lloyds, Maybank, Natixis, OCBC, Rabobank, SMBC and UOB.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.