Standard Chartered Plc and DBS Group Holdings Ltd. developed and tested a distributed ledger late last year that may offer a solution to the risk of multiple-invoice fraud faced by the largest trade-finance banks.
The trial, code-named TradeSafe, involved as many as 60 mock invoices lodged on a ledger that utilized Ripple technology, a parallel platform to blockchain. The two banks are working with the Infocomm Development Authority of Singapore, which seeks to advance technology and telecommunications in the city, to promote the system.
This is how the ledger tested in the TradeSafe project worked:
- The invoice number and Bill of Lading number were used to generate a unique hash value that is stored on the distributed ledger.
- The design of the system potentially allows the incorporation of additional invoice details, such as the amount, description of goods and date to create the hash value.
- Commercially confidential information, such as terms of financing, won’t be included in the standard data fields. Therefore, while the hash value is visible to banks with access to the ledger, confidential details of the underlying invoice are not.
- The bank receiving the invoice attaches one of four processing states to that hash value.
- The processing states note whether the invoice had been received, was being processed, had been financed or rejected.
- If another bank enters the same invoice data fields into the ledger, it would generate the same hash value, alerting the second lender to the fact that the invoice already exists on the ledger -- and what stage of processing it was at.
- Based on the stage of processing, the other bank can then decide what it wants to do with that invoice.
- Further efforts can be made to eliminate the risk of fraud or human error, said Gautam Jain, Standard Chartered’s global head of digitization and client access for transaction banking. For example, the port authority or the customs authority can help validate the invoices in TradeSafe to ensure accuracy, he said.