Blockchain – Who does the Processing? | Interview with Traydstream CEO

As seen on Trade Finance Global here.

 

Traydstream was designed by banking and technology veterans who experienced first-hand the inefficiencies faced in the provision and receipt of trade finance by banks, financial institutions (FIs) and corporates. We spoke to Sameer Sehgal, CEO of Traydstream about the digitisation of trade rules using software.

 

Sameer Sehgal has a premier banking background, having worked in a number of senior roles internationally. Prior to joining Traydstream he headed Citibank’s Trade business across EMEA (Europe, Middle-East and Africa) from 2009-2017, at a time when it grew to be the largest trade bank in the region. Sehgal is recognised as a business builder, who in addition to expanding Citi’s trade footprint in EMEA from 17 markets to 42, also introduced a number of new capabilities including expansion into Supply Chain FinanceExport and Agency Finance, ShippingCommodities Finance, and Sales Financing.

He comes with vast experience across geographies in Asia and EMEA. Earlier in his career Sehgal also held senior roles at Bank of America and ANZ. He holds a B.Tech from IIT Kharagpur, an MBA from FMS, and an Advanced Management Programme from Wharton US.

“Everyone talks about blockchain, but blockchain doesn’t do the processing” – what is Traydstream and how does it actually work?

Traydstream is a Software as a Service (SaaS) that digitises the tribal knowledge of international trade rules and compliance requirements to offer complete transaction management and automated end-to-end document scrutiny on-cloud or on-premise.

Using Traydstream’s proprietary Optical Character Recognition (OCR) software, banks and corporates begin by digitalising the physical (paper-based) transaction documents into a machine readable format. The platform assumes paper inputs but is designed to work equally well with digital input protocols. The extracted data can then be digitally checked (as opposed to manually) against the Letter of Credit (LC) for potential discrepancies or blank fields. The documents are scrutinised by over 200,000 machine learning algorithms that contain the international rules and regulations that all trades must abide by, such as the International Standard Banking Practise (ISBP) and the Uniform Customs and Practise for Documentary Credits (UCP). It is a unique capability which we are not aware of anyone else offering globally; its design relies on decades of experience from some of the best and brightest in banking and business. Additional compliance and sanctions checks are then also conducted to the documentation to aid banks and corporates in their assigned task of moderating transactions and preventing erroneous or fraudulent trade. The platform therefore provides in one fell swoop end-to-end processing of transactions across Digitalisation, Rules Scrutiny, and transactional Compliance checks, reducing errors and turnaround times to a fraction of what they are today.

Traydstream represents a huge shift forward in terms of working practise as technology lifts the burden of manual scrutiny (and the potential for human error) and vastly reduces the turnaround times of international trades.

The basic tenet of Traydstream is to accelerate and make more efficient what is currently heavily manual and paper-oriented. Trade finance classically has been processed in a very sequential manner, i.e. from the seller who checks documents evidencing sale, to his bankers, and onto the buyer’s bankers and then finally the buyer. This 4 step process can take up to 2-5 days at each stage and hence 8-20 days end-to-end. Traydstream currently has been able to reduce the turnaround time at each stage to circa 10-15 minutes which is a gamechanger in costs, turnaround times and efficiencies.

However, with blockchain, Traydstream aims to take it to the next level, i.e. simultaneous processing as opposed to sequential processing. With the marriage of blockchain (ethereum platform) and a robust file-sharing protocol, the combined tool allows data to be placed in the middle for all 4 parties to receive and check the data simultaneously and decide immediately. Thus by welding the current capabilities of the platform with blockchain, we believe we will totally reshape the trade finance processing landscape globally.

Blockchain is a very powerful tool and, coupled with the unique capability of Traydstream, we believe will have a profound effect on trade finance. We have already conducted a few corporate experiments with banks and are looking to successfully embed blockchain onto the platform by the end of 2018.

What is trade finance and why is it Important?

Trade finance is the facilitation of domestic or international trade between buyers and sellers by the intermediary financing of banks and FIs. It’s important because it underpins a huge amount of international trade, the World Trade Organization estimates some ‘80-90% of world trade relies on some form of trade finance’, i.e. circa $20-22 trillion. Trade finance helps thousands of large corporates and millions of SMEs around the world to sell their goods and fulfil their financing needs.

The provision of trade finance however relies on a complicated chain of document referral between the trading parties and their correspondent banks. These documents evidence everything from the credit due and payment terms, to the correct goods being sent to the correct destination. Despite waves of automation elsewhere in finance, trade finance has remained exclusively manual and paper-based, with less than 5% automated. This reliance on manual checks leads to hold ups in transactions, human error, and a proclivity from banks to finance only the larger, big-ticket transactions that warrant the cost of processing. This tends to compound the issues of smaller traders who already struggle to secure the credit their business requires. That’s where a solution like Traydstream comes in handy, since it accelerates processing, magnifies controls and automates manual processing. This then makes it possible for banks to process all sizes of transactions.

How does Traydstream alleviate some of these trade finance issues?

Traydstream applies a range of best in class technologies, including specifically designed artificial intelligence to alleviate the burden of manual scrutiny. Currently banks rely on armies of ‘document-checkers’ to manually scrutinise the data for discrepancies, blank fields and possible infringements of the rules and regulations that govern world trade. Using Traydstream, banks can remove much of the initial leg-work, and free up employees to work on more elevated decision-making activities in the process, and to deal with the greater amount of transactions that are now possible. Plus, as the economic benefits of labour arbitrage are reducing, the incentive for technological solutions to the problems of scale have greatly increased. Reducing turnaround times and processing costs are a key goal right now for the banks and FIs who are looking to improve their trade revenues in a climate of increased regulatory responsibility. The fact that it adds to the assuredness for banks vis-à-vis compliance magnifies its utility for banks.

Can you give some examples of how Traydstream has or can help businesses? 

We’re currently engaged with some of the world’s leading banks and large corporates who are looking to improve operating costs by modernising their internal operational trade flows. During the pilot phase, we usually work on-site with the client on the setup of the platform and training of the team. Once live, clients are able to utilise fully the three modules that make up the Traydstream solution: Optical Character Recognition (OCR) software for digitalising trade documents, the Rules Engine, and the Compliance function.

There are a number of benefits for corporates and banks, including:

  1. Banks can use the tool to improve their current efficiencies (by at least 60-70% we believe from a cost and turnaround perspective);
  2. While doing so banks get the additional benefit of being in greater control of their trade and compliance checking, which makes them more confident in weeding out fraudulent cases;
  3. Banks are also looking to white-label the solution to corporates around the world, thereby reducing their own operational burden immensely. This way documents received by banks would have been checked already on the Traydstream platform and would be clean and ready for banks to check the documents quickly and send forward;
  4. The use of blockchain further accelerates the process, reducing end-to-end time enormously;
  5. The fact that banks are extending the platform to their clients, virtually removes the need for a number of roles at banks such as scanners; since the data is being input at inception by the seller, it doesn’t need to be input again;
  6. Since processing will be accelerated, and end-to-end turnaround times greatly reduced, the need for working capital comes down drastically. We believe in time the working capital needs for corporates should reduce;
  7. Finally with the use of blockchain we can expand the ambit to other key players in the trade ecosystem – i.e. freight forwarders, insurers, Chambers of Commerce etc..

While the above lists a number of the benefits to all parties; we do believe there will be further benefits in time that make the platform a true gamechanger.

What are the big opportunities and objectives of Traydstream in the next 3-6 months?

The opportunity for Traydstream is huge. Corporate banking and specifically trade finance are sectors that have seen a paucity of technological innovation, and the demand the demand for automation is huge. As wider digitalisation takes place in finance and business, there is rising demand for technology that can help facilitate accelerated trade flows and meet the challenges of scale without the necessary spike in costs.

To ensure Traydstream’s continued expansion, our focus areas for the coming quarter are:

Commercial

We are currently in the process of converting pilot-programmes into full commercial mandates. Our first multi-year mandate is scheduled to start in a few weeks, with a client who we have been piloting with for 6 months, with two others scheduled for June. Concurrently, we are working behind the scenes at a number of leading banks who are keen to white-label Traydstream to their clients and offer a streamlined internal document scrutiny process. Beyond this, there is a list of 50+ banks and corporates who are keen to test and deploy are solution. To capitalise on the unbelievable interest we’ve garnered so far, we are also in the process of a Series A raise, which we intend to close by end of this quarter. 

The Platform

While we are actively engaging with clients, we are also dynamically changing our platform at the backed, making it more scalable, robust, secure and user friendly.

With 2-3 Software Releases scheduled for the coming quarter, we are expanding the platform’s key capabilities as well as making significant improvements to the performance of each of the three core modules as we ready the software for a wider commercial take-up.

Digitally enabled screening for Dual Use Goods (goods of both military and civil use), will form part of the Compliance function. This new feature utilises text mining to aid banks in their verification of traded goods by screening goods descriptions for occurrence of goods prohibited by these international trading standards.  We’re also working in tandem with shipping and freight-forwarding agencies to offer brand new container validation technology to augment the compliance function yet further.

Following our recent corporate experiments with banks and blockchain technology, we are pursuing the development of a scalable model that would embed blockchain technology into the platform’s transaction cycle, and offer clients a real alternative to the sequential order of document processing that currently underpins trade finance.

Organisation

We are in the process of making a number of senior hires at Traydstream, as new roles emerge with the company’s expansion. We have just announced the appointment of Shishir Vyas as Chief Digitisation and Client Experience Officer, but a number of further hires are planned for roles across client management, compliance and technology, over the coming weeks and months.

We’re also working on the framework of a very exciting partnership with an international IT, Business and Consultancy firm, designed accelerate and up-tier our impact in the market.

By the end of 2018 we are aiming to have created a solid base with clients and ample experience to then go aggressively expanding into the bank and corporate segment globally.

Traydstream names former Citi exec Asif Ali MD, product

As seen on Finextra here.

 

Trade finance software firm, Traydstream, have announced the executive appointment of Asif Ali as Managing Director of Product.

Ali brings extensive knowledge of the trade space to the FinTech, having most previously headed Citi’s Trade Business for United Arab Emirates (UAE), Iraq and Lebanon, in addition to Corporate Trade Sales for Middle East and Pakistan (ME&P).

In its bid to become the go-to platform for banks and corporates looking to digitalise and automate the core trade finance processes of document collection and verification, this is the latest in a string of appointments announced by the firm, as they seek to build out their core management with top trade and technology individuals.

Asif Ali’s appointment as Managing Director of Product represents a significant addition to the team, bringing over 23 years of trade experience across business management, product development, client sales and operations, and risk control. At Traydstream, Asif will manage and own the core product and compliance pillars reporting directly to the CEO.

On his shift into FinTech and appointment at Traydstream, Asif Ali gave this comment: “Having faced firsthand the pain-points of manual dependence and the duplication of processes, Traydstream’s solution stands out as truly having the potential to automate the back-end processes that underpin trade finance, making banks’ and corporates’ lives markedly easier.”

Co-Founder at Traydstream, Achille D’Antoni described Ali’s hire as “Excellent news for Traydstream; Asif is a consummate professional whose world-class trade knowledge and expertise will ensure the continued development of our leading solution to the manually dependent and cumbersome global operations of trade finance”.

Trade finance – how it’s catching up with the digital age

As seen here on Global Banking and Finance Review

 

Uzair Bawany, COO at Traydstream, explains that the ancient process of trade finance is finally being transformed thanks to the application of artificial learning, machine learning and robotics.

Although it drives the global economy, trade finance processing remains in a time warp and hasn’t really progressed over the centuries. Despite the modern digital world that we live in, current trade finance operations still involve manual, paper-based processes that are duplicated across multiple parties. The net result is that these activities remain extremely costly, time intensive and inefficient. At long last, the trade finance process is now the target for massive disruption to move into a new era of digitisation and efficiency.

Why change is required

A good example of the problem is the transfer of trade documents. A supplier will draw up the documents and send them to its bank, which will then send the documents to the buyer’s bank, which will then send them on to the buyer. All parties involved basically perform the same process, which is an enormous waste of time and resources – and can take many weeks to complete.

This status quo creates major inefficiencies at every point of the trade finance process, as well as security and compliance risks – with heavy fines and an abundance of regulatory obligations, becoming increasingly commonplace.  Some firms have tried to digitise parts of the process with electronic Bills of Lading and other similar components to a transaction, but this really isn’t solving the real issue – as checks still need to be performed.

Imagine the scenario of a trade transaction between two oil majors, transacting a large oil shipment. To start the trade, the shipment is made and the exporting major prepares its’ documents – this process could take between three and four days. The documents are then handed over to its bank for checking against the Letter of Credit, which could easily take two more days. At this point, it would be highly likely that the documents are sent back to the major for corrections due to discrepancies – which further delays the end-to-end chain. These documents are then physically sent to the buyer’s bank that will take another two days to process. If all is well, the buyer will get the documents to concur and be ready to pay.

This end-to-end process could take ten to twelve days, not to mention the holiday impact – depending on jurisdictions. That said, oil majors, typically benefit from a faster turnaround, and so the process can be quicker. On the other hand, with SME’s, or other sectors, this process through the banking system could take much longer. It’s also a process that goes on day in day out for all companies trading in the international arena.

The biggest barrier to addressing trading inefficiencies in the finance sectors has been the inertia to change. As trade finance processes have remained the same for decades, it’s hardly surprising there is a certain comfort factor associated with this.  Additionally, over the last ten years, financial organisations have been faced with huge regulatory pressures and increased capital costs. A general political climate where banks need to become more utility-like in their approach has also meant that “change” has not been their priority.

Thankfully, we are now seeing a new industry focus on efficiency and accuracy, driven by the huge attention on expense management – which is forcing organisations to be more receptive to change. Life after Brexit is also another key driver – especially when dealing with the inevitable changes in trading rules. Solutions are therefore being sought that enable operational processes to become leaner and fitter – and this feels like a behavioural shift which is more endemic.  This can only be a good thing for the industry.

Technology game changers

To overhaul the trade-finance industry and more specifically – the documentation process, senior management and business leaders in the banking and finance sector are embracing technology and championing it through their respective organisations. Digitalisation and leading-edge technology are now the key areas of strategic focus – driven by the promise of potential cost reductions, efficiency and compliance benefits.

New technologies, such as robotics, are positively disrupting the trade finance sector, specifically with the automation of key processes such as moving documents and data, enacting document comparisons and performing due-diligence checks. Other technology innovations like artificial intelligence (AI) and behavioural learning can arm trading partners with transparency and predictability in global trade and provide a greater capacity to identify potential non-compliance and fraud risks.

In practice

New digital, cloud-based, platforms are emerging that enable banks and corporates to complete trade finance operations, in minutes – rather than days. Through the use of best in class technologies, in a safe and secure manner, information can be shared, checks can be conducted and the entire process can be consummated quickly. These platforms work by scanning trade finance documents and extracting the data using advanced Optical Character Recognition (OCR) software which the platform can use downstream. Subsequently, the data is run through a very sophisticated artificial intelligence and machine learning-based, rules algorithmic engine.

These platforms are able to come up with responses and decisions which humans currently take on a daily basis, enabling the entire process to become data-driven – as opposed to paper dependent – with an exceptionally high rate of accuracy and precision. These automated steps include document discrepancy-checks, due-diligence, and regulatory and compliance screening, thereby making the role of the user, more the exception rather than the rule in discovering errors, and removing the need for mundane, repetitive activities.

The underpinning of any global system for banks and corporates needs to be in a very safe and secure environment, so platforms use the best in class measures to keep data partitioned and protected.  Very soon, blockchain technology will also be integrated to further enhance transaction processes and research is currently being conducted on live trades. Once incorporated, it will reduce the trade cycle time even more.

Positive outcomes

This new technology wave promises to reduce the costs and complexities of trade finance for banks and corporates, and even enhance working-capital management. The use of Smart contracts (i.e. digitised contracts), AI and Machine Learning to automate processes –  ensures a more streamlined operational process across the whole Trade ecosystem.

The ability to access, examine and approve original documents remotely and separately from other parties—anywhere across the supply chain— will improve logistical efficiency at banks, ports and terminals. By enabling individuals in different countries to collaborate on drafting digital documents, it will also reduce errors, centralise processes, maintain data integrity and accelerate the completion of agreements from weeks – to minutes.

Another key benefit of digitalisation is by increasing visibility and by making processes more efficient and reliable, it becomes easier to comply with regulatory requirements. With the increased control and visibility over documents, and the capability to instantly transfer documents across the globe – this can help organisations reduce the risk of fraud too. Documents can be issued or endorsed only by authorised users and can be configured to prevent unwitting transfer to sanctioned parties.

There are also wider economic benefits. As the cost of processing a letter of credit decreases, this reduces the entire cost of trade finance operations. The ease of process also facilitates customs-clearance procedures—allowing goods to move through supply chains more easily and reach consumers faster.

Looking forward

Although change won’t happen overnight, and transformation is still at an early stage, there’s clearly great potential for technology to create major efficiencies and opportunities in the trade finance sector. Ultimately, as finance sector organisations continue to show increased interest in collaboration, and as technology continues to innovate – the multiple benefits for all parties operating in trade finance will be transformational.

Expansion of Traydstream’s C-Level Continues

As seen here on Global Banking & Finance Review

 

Trade finance software firm Traydstream has announced the executive appointment of Shishir Vyas as the firm’s Chief Client Experience & Digitisation Officer.

As the fintech continues to expand its core offering to banks and corporates of automating the critical processes that underpin trade finance, the appointment signals the next stage in the company’s progress from pilots to commercial mandates.

In his role as Chief Client Experience & Digitisation Officer, Shishir will focus on leveraging the latest technology to enhance customer engagement (spanning across digitally enabled touch-points and assisted channels), and leading the creation of innovative solutions at Traydstream to improve the value derived by end users.

Shishir brings hands-on expertise in the implementation of internet and mobile banking, portal technology and architecture, and customer relationship management (CRM) or customer-centric solutions, gained from over 20 years at banks and other financial services institutions. He has led award-winning technology solutions for leading global banks, enhancing business capability across multiple markets. Previous to Traydstream, Shishir has worked at leading multinationals such as Citi, Mphasis, ANZ Grindlays, and TATA Motors, and most recently ran his own digital strategy consultancy business, focussed on financial services. He holds an MBA from Indian Institute of Management (IIM), Calcutta, and a Bachelor of Technology. from Indian Institute of Technology (IIT), Kanpur.

On his appointment, Shishir commented: “Having worked with some of the best and brightest technology folks in banking and technology, I was seriously impressed by how this highly talented team, comprised of banking experts and technology ninjas, was working together in close concert to create a solution for a challenge that no-one had attempted to address previously. I am thrilled to be a part of this superpowered team, and very excited to be leading the Client Experience & Digitisation efforts for transforming how banks, corporates and even SMEs engage in international trade.”

Traydstream is marked by its holistic approach to the digitalisation of trade finance, with a focus on the automation of key processes like document discrepancy-checks, due-diligence, and regulatory and compliance screening, as well as the initial stages of converting data to digital format (a process achieved by their proprietary Optical Character Recognition (OCR) technology). Designed and built by leading individuals from the banking and technology communities, Traydstream is making headway in an industry increasingly aware of its need for reform.

Traydstream named Online Technology Provider of the Year

 

Trade Finance software firm Traydstream have been named ‘Online Technology Provider of the Year’ at the prestigious FStech Awards 2018. 

Now into their 18th year, the FStech Awards, hosted by FStech Magazine, showcase excellence and innovation within the UK and EMEA financial srevices sector. Celebrating the very best across a range of categories, the awards ceremony and gala dinner were hosted by the brilliant comic Lucy Porter on 22nd March at the famous London Mariott Hotel, Grosvenor Square.

Traydstream had also been nominated for the ‘Financial Sector Innovation of the Year’ category, but were pipped to the post by TSB Bank.

You can view all other category winners here.

Collecting the award on the night, Traydstream CEO Sameer Sehgal gave this comment on their success: “We are delighted with this continued recognition of Traydstream’s capabilities. It is a unique product that is transforming the trade finance landscape for the better, offering clients more accurate and efficient document processing and scrutiny, at a fraction of the time and cost.

Traydstream is making waves within the world of Trade Finance, an industry heavily reliant on manual intervention, and the paper-intensive duplication of work. The platform is currently being road-tested with numerous banks and large corporates who are seeking to improve their trade operations with the implementation of newly available technology.

About the awards:

The FStech Awards, the official awards show of FStech Magazine, represents the pinnacle of best practise, a chance to learn from the best, a fantastic gala dinner, entertainment and the chance to network with the best of the industry. It’s free to enter the awards and you can put your organisation forward in as many categories as you wish.

http://www.fstech.co.uk/awards/

Learnings from the PNB Saga: Control Fixes at Banks

The following article was written by industry experts at Traydstream, the Fintech company that has recently established its centre of Development and Operations in Mumbai, India. This is an attempt to demystify and debunk some of the myths that have emerged around the mechanism of the fraud that has been unearthed at PNB, and that has attracted such attention across India, and the global financial services community.

 

Reams have been written about who, whom, and how the fraud was perpetrated in the PNB story and it’s likely that the fraud will become a case study in business schools, and part of credit training at banks and Financial Institutions, regarding the Do’s and Don’t’s when lending. While the fraud itself is best left to the investigating agencies to explore, there are a number of learnings for bankers even at this early stage of investigations.

 

Here are a number of measures that could be introduced in the banking system, to help prevent the occurrence of fraud, as in this instance:

  1. Recognising and tallying all unfunded liabilities

An undertaking is an unfunded liability which could crystallise into a funded liability at any time. It needs to be recognised and recorded accordingly. All unfunded liabilities like letters of credit, guarantees, etc. should be tallied with the SWIFT / SFMS / secured stationery on which the bank has issued these instruments to be fully updated on all contingent liabilities.

 

  1. Balance confirmation at periodic intervals

On the banks’ credit systems, LoU’s should be given the same status as Financial Guarantees and accounting entries should be accordingly booked at the  time of issuance of the LOU. The lending banks against LoUs need to take care of their interests and it necessitates that the banks as well as their auditors insist on balance confirmation of the LoUs from the issuers.

 

  1. Integrate books of accounts as much as possible with the transactional flow

All transactions need to be fully integrated with the accounting records in the core banking system so that there is no transaction outside and the possibility of mismatch between the transaction movement and the accounting records is mitigated.

 

  1. Enhanced due diligence for higher levels of exposure

Automated higher levels of due diligence at a transactional and exposure level, mitigates the risk of higher amounts of transactions or higher exposure being fraudulently or inadvertently taken by officials at the operating level. The due diligence on a transaction should not be restricted only to the onset, but needs to extend to all stages of a transaction, such that if the credit quality of the client deteriorates, or market conditions change, the bank can initiate preventive steps to save its interests. It doesn’t seem in the case at hand, that  any such constant monitoring was being undertaken, allowing the perpetrator to make full use of the lack of attention or controls.

 

  1. Tighter audit and control processes

All products require comprehensive very tight policy and procedures in place, and new products / processes should requires sign-off from all the control teams in the banks. This will bring to surface any inherent risks in the product / process and enable sufficient controls being laid down in the process document / risk / audit checklist. One of the big problems in banking worldwide, is the lack of proper systems and policies to record all exposures – real and contingent. With large banks it’s possible that branches, units far flung from each other, could be operating under a different standard from the one laid out for the head office. This requires constant communication and audit to ensure the same processes are followed.

 

  1. Due diligence on the lenders against LoUs

While it is obvious that the risk of lending against a LoU is with the bank issuing the LoU, it cannot absolve the lending bank of performing due diligence on the customer to whom the amount is being disbursed. Ultimately, any lending has to be reviewed and accounted from a perspective of the worst case situation. What’s the worst that could happen? In this case it would very quickly have led to the scenario where the LoU’s were called and hence PNB would have had to pay. Not lending directly, does not mean not lending or not being exposed. Having an intermediary in the lending, makes it even more important for the credit analysis to be done thoroughly since the intermediary might not have the same standards as yourself.

 

  1. Analytics on funds’ flow

We are unaware as of now whether the amounts were directly disbursed to the borrowing entities or it was disbursed into the nostro accounts of PNB. If was indeed in the nostro account of PNB, a tighter analytics on the nostro funds flow, as is required for good AML checks would have brought to light such huge flows on behalf of a customer, without sufficient limits. This is equally applicable to the lending banks against the LoUs. What strikes one as odd is that the sums credited to PNB were, it seems, transferred by the overseas lending banks, as exposures to PNB and not to the final obligor. As bankers, that’s a sure sign of the money being lent to PNB and not the obligor. If that is indeed the case, then these funds were never lent to the obligor but were lent to PNB for the funds to be returned. However, if the accounting entry from the lending banks was to the obligor, the LoU’s were the support under which the lending was predicated and hence were a  full credit exposure for PNB. It should have then been recognised and recorded accordingly.

 

  1. Culture of adherence to norms

This should be set as an example from the top. There should be zero tolerance to deviation from norms, including sanction of credit limits to the high and mighty, change of roles, documentation norms, etc., irrespective of the rank of the official within the bank. Any instances of wrong doing should be met with appropriate disciplinary measures, to set an example for all others.

 

  1. What seems to be “too good to be true” is likely ‘not true’

Like all industries, bankers also have revenue targets to be met. However, if someone is willing to pay you a lot of money for almost next to nothing, it should raise a big red flag. The age old truth in finance, high risk / high return has never been so true.

 

  1. Relationship Banking

One of the fundamental of banking has always been maintaining a tight relationship with your client, such that you are aware of everything that’s happening to his business. It’s called ‘know your customer’ or KYC. In this case it seems, KYC norms were not adhered to at all. In fact, in some of the more prudent banks worldwide, KYC does not only restrict itself to the client being lent to, but to the secondary industry sources and surrogate checks such as D&B etc. That seems to have been missed totally here.  Specially for such a specialised industry like Diamonds, where to the untrained eye, the difference between glass and a precious stone is very difficult to ascertain. As the adage goes ‘Easy credit, uneasy creditors’, one has to be very careful when lending to have done one’s complete homework.

 

  1. Grow slowly, Lend slower

One of the other principals lending is based on, is grow the credit limit slowly. Do not proceed to increase your exposure, exponentially within a short period of time. Experience a few cycles with the client and only with a thorough analysis of the client’s financials should one consider an increase in lending.

 

  1. Need Based Finance

Lending to a client should always be provided only for the amount and duration required, never for more than that. Why tempt the obligor into diverting funds that he probably did not deserve and desire, into extraneous uses, that can only come to hurt? This was one of the fundamental learnings from the Sub prime crisis in 2008, but seems to have been completely forgotten or overlooked in this case.

 

  1. Refresh and Call Back

Ongoing client businesses require ongoing funding. Their cash flows are constantly coming in and out and hence banks need to fund them constantly. While the predominant businesses around the world, are genuine and build safeguards and controls to monitor the ‘ins’ and ‘outs’ closely, banks have for decades followed a policy of call back. What that requires is for the client to pay back all his working capital dues for at least a week to 10 days to the bank. The net outstanding to the client comes down to zero and hence permits the bank to get itself comfortable that the client has the ability to return the funds and is not using successive borrowings to pay back the earlier ones.

 

  1. Credit Bureau

Smart fraudsters are also adept at moving funds between lenders and hence central banks need to a) ensure a regular recording of the exposures that banks have to the obligor and b) banks need to review these exposures to analyse their own lending vs the overall lent to that client. This ensures that a client has not over borrowed from the industry and his exposure is within his client limits.

 

  1. Large debtor reviews

One of the other prudent checks that’s prevalent in banking industry is the constant review of the large exposures that the bank might have. At the least it might surface the clients where revenue might be at risk, if the client moves on. But the other purpose of such a review is any of these hidden risks that the bank might have been exposed to. For if a client is making a lot of money for the bank, but does not have a corresponding capital allocated to the exposure or a requisite reason for the inordinate earning, it should serve as a red flag.

 

  1. Governance

Finally, any industry, and specially banking where billions get lent and traded daily, is dependent on governance. A tightly governed organisation has multiple avenues for such risks to be fleshed out. Whether it be a business review, a risk review, and controls check or a transactional audit, it’s critical to ensure that Governance is extremely tight for the bank to rely on. It’s usual for things to go back to normal as time passes, and the worst thing possible would be not to learn from the incident. Institute processes such that it never occurs and conduct a thorough check such that no other such hidden exposure is lurking in the books. For the others who have not been impacted, this is a great learning ground so that one can mitigate any such issues without having to go through the painful experience of living through the loss.

 

In today’s day and age, with a plethora of technologies at our disposal, it’s paramount to automate systems, connect platforms, be networked and have best in class solutions that support processing, while remaining constantly alert to evolving environmental conditions.

 

About Traydstream Platform:

Traydstream is a machine learning based financial technology (Fintech / Regtech) platform designed to automate Trade Finance processing for banks and large corporates, reducing operational overheads and improving the accuracy and speed of error and fraud detection in transaction documents. The platform digitises processing and constantly connects with checks and controls around the world, online and real-time, to verify the genuineness of transactions, keeping banks and lending safe.

Traydstream arm in India to service Global Banks and Corporates as Centre for Trade and Technology Expertise

As seen on Global Trade Review

Traydstream, a UK-based fintech company that aims to digitalise and automate trade finance, has opened a new office in India, its first global servicing hub for its trade, technology and client service operations.

The entity will house experts in the disciplines of trade and technology to support the ongoing development of Traydstream’s proposition, as well as servicing clients around the world.

Launched last year, the fintech firm’s solution digitalises trade documents and automates regulatory compliance screening using artificial intelligence (AI) and optical character recognition (OCR) technology.

Traydstream’s CEO, Sameer Sehgal, tells GTR the company has been talking to a number of industry seniors and is looking to announce its director of operation and the office’s executive team soon.

He says the creation of an India entity was a “natural decision” for the company.

“Over the last few decades India has firmly established itself as a leader in the tech and software industry and as a primary offshore processor for trade for organisations around the world. It’s got a deep bench strength of trade and banking professionals focussed on operations, something which we found extremely attractive,” he explains.

Based in Mumbai, the new entity will be able to serve clients 24/7, together with the office in London, Sehgal adds.

Traydstream’s solution consists of three key modules: an OCR engine, which uses AI to read, scan and instantly structure and store paper-based information digitally; a rule-checking function; and a compliance engine that utilises machine learning algorithms to verify and scrutinise for compliance with international trading rules and regulations.

The company is currently in varying stages of discussions, including undertaking pilots and proofs of concept, with almost 50 banks and corporates around the world. Around 15 of them are based in Asia.