Measures to Minimise Recurrence of Recent Cases of Trade Financing Fraud

Mr Murali Pillai asked the Prime Minister in light of the recent cases of trade financing fraud involving billions of dollars leading to steps taken by banks to de-risk from this area, what steps will be taken to (i) ensure that there will be a sufficient number of banks providing such facilities on reasonable terms to traders (ii) reduce the fraud risks involved in such transactions on banks and other stakeholders and (iii) restore Singapore's reputation as a premier global trade financing hub.

The fraud cases in the commodities trading sector have been attributed to weak disclosure practices and internal controls among a minority of trading companies. However, we do not take this lightly. To prevent such fraudulent activities and restore confidence, there needs to be a strengthening of standards and practices of transparency and governance in the commodities trading sector, more robust credit risk assessment, as well as a move away from paper-based processes as they are more susceptible to risk of fraud. These are the follow-up actions that banks, the Monetary Authority of Singapore (MAS) and other government agencies are undertaking.

The Association of Banks in Singapore (ABS), with the support of MAS, Enterprise Singapore (ESG) and Accounting and Corporate Regulatory Authority (ACRA), is developing a code of best practices to enhance commodity financing standards in Singapore. The banks are currently consulting the trading companies, who themselves have an interest in higher standards being practised amongst all players in the industry. The code should be finalised in Q4 2020.

Importantly, MAS is also partnering the industry and other government agencies to digitalise trade financing, and replace the current paper-based systems with electronic documents and data flows. This will better ensure authenticity of documents, and allow banks to obtain data directly from Singapore Customs to perform risk assessment.

As we take progressive steps to improve the system, trading companies are facing more rigorous credit assessments and tighter financing conditions. They will be able to access the bank financing that they need, commensurate with their creditworthiness. But the initiatives are necessary, to enhance commodity financing standards and practices, and strengthen Singapore's resilience, relevance and competitiveness as a global commodities trading hub.