SWIFT and financial technology company, MonetaGo, are to collaborate to develop a blockchain system to help Indian banks prevent fraud.

The developers claim the system will be able to prevent letter of credit (L/C) frauds such as those that featured in the US$2 billion fraud allegedly perpetrated by celebrity jeweller Nirav Modi.

Shared ledger

Based on MonetaGo's financial services network technology integrated with standardised SWIFT financial messages, the platform will provide banks with a shared distributed ledger network.

The platform essentially employs a blockchain-based solution to help prevent fraudulent double financing of invoices.

The network allows banks and SWIFT to exchange information about invoices in order to ensure the invoices are not financed multiple times.

L/C fraud prevention

The developers are responding to a spate of frauds in recent years. Earlier this year it emerged that diamond dealers Nirav Modi and Mehul Choksi, with the help of a Punjab National Bank (PNB) employee, ensured that L/C facilities routed through the SWIFT system were not reported in PNB's core banking system.

The US$2 billion fraud, according to the developers, could have been avoided had PNB's core banking system been integrated with SWIFT.

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