Just published - Technical Advisory Briefing from the ICC Banking Commission.

Latest Technical Advisory Briefing #9 - "Direct presentation of documents to an Issuing Bank under a documentary credit subject to UCP 600" is now available under the Digital Library.

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Collective responsibility shared between financial institutions (FIs) and law enforcement agencies amongst other public and private sector actors is central to countering terrorist financing according to the Wolfsberg Group’s newly revised and updated statement on the suppression of the financing of terrorism.

The statement, which replaces one published in 2002, reflects changes in counter financing of terrorism (CFT) measures, the evolving nature of public-private cooperation, and the importance of global cooperation.

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If its advocates are to be believed, the technology known as Generative Artificial Intelligence (GenAI) will in due course transform nearly everything we do in the modern world today. And to an extent, since the advent of ChatGPT by OpenAI in November 2022 it already has: entire industries are now managed differently including education, coding and research.

There are as many, if not more examples of where the hype has exceeded the reality of the (lack of) value added. And of course, there have been dangers released in the latest technical revolution, such as breaches of personal privacy, generation of misinformation and malign use by bad actors and autocratic governments (not to mention the threat of the robot apocalypse).

The World Supply Chain Finance Report 2024 aims to offer an insight and review of the global supply chain finance market, through both regional and specialist articles contributed by industry experts.

For the purposes of this Report, the term ‘supply chain finance’ has been predominantly used to signify an arrangement whereby a supplier’s invoices are approved by a large buyer for financing by a bank or other financer; also known as reverse factoring, and approved payables finance.

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The global letter of credit (L/C) confirmation market generated US$3.91 billion in 2020. It is projected to generate US$5.09 billion by 2031, and grow at an annual rate of 2.7 per cent between 2021 and 2030, according to a new report published by Allied Market Research.

The report takes a look at the impact of the Covid-19 pandemic on the L/C confirmation market, and analyses leading market players, including Bank of America, Citigroup, DBS Bank, JPMorgan Chase, MUFG Bank, Mizuho Bank, Scotiabank and Standard Chartered.

Following on from our first predictions article, the incremental gains for credit insurance, trade and supply chain finance, TFG surveyed 9 more industry experts looking at what we might expect for technology for trade, treasury and payments in 2024.

As we ring in the new year, the trade, treasury, and payments is indeed poised for another year of significant evolution.

At Trade Finance Global (TFG), we have gathered insights from industry experts to forecast the developments and challenges these sectors will face in the coming year. Their collective wisdom sheds light on the overarching trends and expected transformations across several key areas.

Egypt's struggles to obtain sufficient foreign currency liquidity to establish and maintain a sustainable flow of import letters of credit (L/Cs) has prompted several private and state-owned Egyptian companies to sell parts of their businesses to foreign buyers to access US dollars.

The shortage of foreign currency, exacerbated by commodity price hikes since the Russia-Ukraine war, prompted the authorities working through the central bank to use a range of controls over L/Cs with the aim of shoring up Egypt's foreign reserves.

Two more African banks have signed up for facilities provided by development institutions that guarantee trade finance instruments, including letters of credit (L/Cs).

Agreements with Ecobank Malawi and Bank of Africa Tanzania Limited (BOAT) follow hot on the heels of the African Development Bank's (AfDB's) approval of a US$7 million trade finance transaction guarantee facility for NBS Bank in Malawi (DC World News, 20 December 2023).

The Bankers Association for Finance and Trade (BAFT) has released an updated version of its guidelines to help respondents establish and maintain correspondent banking relationships necessary for letter of credit (L/C) amongst other international financial transactions and banking services for other financial institutions.

The BAFT Respondent's Playbook 2.0: A Correspondent Banking Relationship Guide is intended as a roadmap for respondent banks on international anti-money laundering and counter financing of terrorism (AML/CFT) standards.

Lawyers at Singaporean law firm Shook Lin & Bok have published a summary and commentary on the recent decision in the case of Winson Oil Trading versus Oversea-Chinese Banking Corporation (OCBC) and Standard Chartered Bank (Singapore).

The Singapore High Court allowed the banks' defences to non-payment on letters of credit (L/Cs) on grounds of fraud. The claim against Standard Chartered was for around US$30.4 million.

BNP Paribas announces the granting of three Inclusive & Sustainability-Linked Financing, which include environmental, social and just transition objectives, to microfinance institutions in Europe and Brazil:

L’Adie in France: Since its creation in 1989, over 180,000 entrepreneurs in France have received financing. As part of its Inclusive & Sustainability-Linked Financing (ISLF), several objectives are monitored: Number of professional loans to women, number of loans to entrepreneurs from priority neighborhoods of the city and welfare recipients; share of microloans that finance the environmental transition of its clients; reduction of the carbon footprint of its activities. PerMicro in Italy: Founded in 2007, PerMicro grants microloans to entrepreneurs and households throughout Italy. As part of its Inclusive & Sustainability-Linked Financing (ISLF), several objectives are monitored: Volume of microloans to microenterprises run by young people and women; value of the portfolio dedicated to financing green technologies and practices, including sustainable mobility, energy efficiency and renewable energies; volume of loans with environmental impact and climate vulnerability assessment.

Purchases under letters of credit (L/Cs) that are consigned to the issuing bank are amongst several red flags listed in new suspicious activity reporting (SAR) guidance to support US financial institutions in reporting potential efforts to evade US export controls.

The guidance issued jointly by the US Bureau of Industry and Security and the Financial Crimes Enforcement Network (FinCEN) also introduces a new SAR key term, 'FIN-2023-GLOBALEXPORT', which US financial institutions should reference when reporting suspicious activity to FinCEN.

Global exposure-weighted default rates for import L/Cs almost doubled from 2021 to 2022, according to the International Chamber of Commerce's (ICC's) latest market forecasts for global trade and trade finance in the emerging macroeconomic climate.

Yet the ICC Trade Register Report 2023, led by the ICC's banking commission in collaboration with Boston Consulting Group and Global Credit Data, reports just a small increase in default rates across documentary trade and open account offerings and demonstrates the low risk nature of the transactions that enable global trade.

BNP Paribas announces the granting of three Inclusive & Sustainability-Linked Financing, which include environmental, social and just transition objectives, to microfinance institutions in Europe and Brazil:

L’Adie in France: Since its creation in 1989, over 180,000 entrepreneurs in France have received financing. As part of its Inclusive & Sustainability-Linked Financing (ISLF), several objectives are monitored: Number of professional loans to women, number of loans to entrepreneurs from priority neighborhoods of the city and welfare recipients; share of microloans that finance the environmental transition of its clients; reduction of the carbon footprint of its activities. PerMicro in Italy: Founded in 2007, PerMicro grants microloans to entrepreneurs and households throughout Italy. As part of its Inclusive & Sustainability-Linked Financing (ISLF), several objectives are monitored: Volume of microloans to microenterprises run by young people and women; value of the portfolio dedicated to financing green technologies and practices, including sustainable mobility, energy efficiency and renewable energies; volume of loans with environmental impact and climate vulnerability assessment.

The Asian Development Bank (ADB) has greenlit a $300 million policy-driven loan. This endeavour assists the Philippine government in establishing a resilient institutional and policy backdrop, aiming to augment Filipinos’ access to financial services.

The primary focus is on the nation’s vulnerable demographic, ultimately fostering economic expansion.

ADB’s Inclusive Finance Development Program, Subprogram 3, champions reforms that amplify financial inclusivity in the Philippines. This encompasses refining the nation’s financial infrastructure, broadening the scope of digital financing, and bolstering the potential of various financial service providers.

Standard Chartered has today published its Future of Trade: Africa report, highlighting the outlook for African trade and providing a view of the African Continental Free Trade Area (AfCFTA) as a key proponent of optimising intra-African trade.

The report finds that Africa’s total exports will reach US$952bn by 2035 and the AfCFTA, once fully implemented, has the potential to increase this figure by a further 29 per cent. This represents an annual growth rate of 3 per cent from now until 2035.

The Asian Development Bank (ADB) has approved a US$300m policy-based loan to support the Philippine government in creating a stronger institutional and policy environment to help expand Filipinos’ access to financial services, particularly the vulnerable segment of the population, and to promote economic growth.

ADB’s Inclusive Finance Development Program, Subprogram 3, is supporting reforms to expand financial inclusion in the country by improving the country’s financial infrastructure, including widening the digital financing ecosystem. It also supports efforts to increase the capacity of financial service providers, including rural banks and nonbank financial institutions, to offer quality products and services accessible through various delivery channels.

Letter of credit (L/C) shortages are bringing shipping services to a halt at Bangladesh's primary port of Chattogram.

Jetties designated for handling container vessels are remaining empty as fewer vessels arrive at Chittagong while the port's ambitious expansion programme is being thwarted by the government's austerity measures.

Lloyds Bank has completed what it believes to be the first transaction under the UK’s new Electronic Trade Documents Act (ETDA) which came into force today [20 September 2023].

The ETDA gives electronic Bills of Exchange, Bills of Lading and other commercial documents the same legal footing as paper documents. The legislation is designed to give UK businesses and participants in the 60-80% of trade transactions worldwide that are subject to English law, more flexibility in how they trade. The Act will also significantly reduce the environmental impact that paper documentation has, while reducing the cost and time taken to conclude international trade transactions.

The Electronic Trade Documents Act (ETDA) has come into force today.

The new law represents a huge step forward into digitalisation of trade flows by eliminating paper flow documents and increase efficiency and transparency. This new act is not imposing the use of electronic documents and is allowing paper ones to circulate as well. In case of the use of electronic documents, they should be stored on a ‘reliable system’ that will permit verification of the authenticity, integrity and singularity of the documents.

State Bank of Pakistan (SBP) governor, Jameel Ahmad, has told a senate committee that letters of credit (L/Cs) ensured that loans made under the concessionary Temporary Economic Refinance Facility (TERF) to some businesses during the Covid pandemic were not used for any purpose other than for purchasing plant and machinery.

The senate's standing committee on finance and revenue had raised questions over the transparency of over US$3 billion of loans approved under the TERF. Members suspected that some funds had been misdirected and expressed concerns over the central bank's weak oversight of the funds.

A judge in a Canadian court case has ruled that a thumbs-up emoji constituted a legally binding acceptance of a contract, ordering the defendant, who failed to fulfil their end of the deal, to pay more than $82,000 in damages.

In November 2021, buyer South West Terminal Ltd (SWT) sought to purchase 87 metric tonnes of flax from seller Achter Land & Cattle Ltd at a price of $669.17 per tonne.

The Competition Commission of Pakistan (CCP) has concluded an extensive study titled “Enhancing Economic Efficiency of SMEs in Pakistan”, identifying barriers to competition, and providing recommendations for improving the economic efficiency of small and medium enterprises (SMEs).

The study is based on data from 50 Financial Institutions (FIs), 18 focused group discussions, and 362 SMEs across 11 cities and a seminar conducted by CCP on women entrepreneurs.

A court in the US state of New Jersey has sentenced two men to prison for their parts in a US$1 million up-front fee fraud that centred on a purported standby letter of credit (L/C) that the fraudsters said would help their victims import gold.

Roy Gillar was sentenced to six years in prison while Harold Mignott faces three years in jail. A co-defendant, Jerrid Douglas is scheduled to be sentenced later this month.

A businessman has been accused by India's enforcement directorate (ED) of using fraudulent letters of credit (L/Cs) and a network of shell companies to cheat banks out of the equivalent of around US$6.8 billion.

The accusations follow the arrest last week of promoter and former managing director of Bhushan Steel, Neeraj Singhal. He has been remanded in custody until 20 June.

Thailand's Bangkok Bank and Indonesia's Permata Bank have collaborated to complete a blockchain letter of credit (L/C) transaction in the Thai-Indonesian chemical market.

The digitalisedL/C transaction also aligns with the concept of green business for sustainable growth according to Bangkok Bank.

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India's ICICI Bank is adding a rupee vostro account (RVA) to its digital online trade platform that includes letter of credit (L/C) functionality according to an official statement.

The proposition will enable Indian exporters and importers to pay and settle export-import transactions in Indian rupees (INR) with RVAs that can be opened with correspondent banks in the Americas, Europe, Asia and the Gulf.

The African Development Bank (AfDB) is continuing its efforts to facilitate letter of credit (L/C) flows in Africa by approving a trade finance transaction guarantee facility for Banque Commerciale du Burundi (Bancobu).

The facility is one of the AfDB's responses to concerns about shrinking L/C availability in Africa since the terrorist attacks of 9/11 led to stricter compliance requirements that prompted some international banks to exit African markets. This process was accelerated by the 2008 financial crisis and, most recently, by the Covid pandemic.

A court in London gave judgment last week in favour of Celestial Aviation Services in its case against UniCredit after determining that the aircraft lessor made valid demands under letters of credit (L/Cs) last year while UniCredit's view that the demands were invalid was wrong.

The commercial court found that a German unit of Italy's UniCredit was wrong to withhold US$68 million in payment guarantees owed to Celestial claiming that it was prohibited from making payments because of sanctions imposed on Russia by the EU, the UK and US following Russia's invasion of Ukraine.

The Asian Development Bank has published a white paper on deep-tier supply chain finance (DTSCF), which potentially extends financing access and transparency down the chain to even the smallest suppliers.

The paper includes analysis of the role and different approaches of fintechs Skuchain, Banco and KashBank may take in the global realisation of this digital financial solution that can involve letters of credit (L/Cs).

The International Chamber of Commerce (ICC) has published a compendium of four guidance papers on documentary credit usage for trade finance practitioners.

The papers contemplate requirements for on board notation; the principle of strict compliance; use of drafts under documentary credits, and simple documentary credit format.

Insufficient industry support for their digital venture has caused international shipping giant A P Moller - Maersk (Maersk) and IBM to abandon their joint Tradelens blockchain-based supply chain platform initiative for international shipping.

Until recently the initiative has been working with banks and other partners on solutions combining digital letters of credit (L/Cs) with other trade finance instrument issuance, including the Tradelens electronic bill of lading (eBL) that aimed to simplify the issuance, transfer and surrender of original shipping documents by digitising the transfer of title process.

Green trade under the European Bank of Reconstruction and Development's (EBRD's) Trade Facilitation Programme (TFP) is growing, according to the bank's Task Force on Climate-related Financial Disclosures (TCFD) Report 2021.

Published to coincide with the COP 27 climate change conference in Egypt this month, the bank's third annual TCFD report discloses EBRD's climate risk assessment methodologies and initial portfolio risk assessments.

While earlier efforts to link sustainable trade finance principles with letters of credit (L/Cs) failed to gain traction, L/Cs in financings with clear climate targets are gradually emerging.

But unlike the capital markets that have the Green Bond Principles and the debt markets have the Green Loan Principles to guide best practice, sustainable trade finance lacks common standards and market definition.

The Roadmap and Vision for Industry, Policymakers, and Traders Worldwide - is the first output of a newly-launched ICC project aiming to align on a consistent definition of sustainable trade and trade finance, set out what specifically constitutes a sustainable trade transaction, and propose a framework and assessment methodology to qualify trade transactions for this purpose.

The first stone of the project is the positioning paper which is laying ground on the definitions of sustainable trade and trade finance, a comparison with other sustainability measures and why those can or cannot be applied for trade finance.

Default rates for both export and import letters of credit (L/Cs) decreased in 2021 compared with 2020 according to a new report produced by the International Chamber of Commerce (ICC) in partnership with Global Credit Data (GCD) and Boston Consulting Group (BCG).

Widely seen as the global authoritative source of trade default rates across all asset classes, the ICC 2022 Trade Register Report also confirmed that credit risk in all types of trade, supply chain and export finance has fallen back to pre-pandemic levels.

Post-pandemic economic headwinds, supply chain disruption and increased requirements to align with environmental, social and governance (ESG) considerations have prompted a recalibration in the perceived risks faced by trading counterparties according to Standard Bank.

It says this has led to an increase in demand for letters of credit (L/Cs) and L/C confirmations to mitigate buyer payment risk, financial institution payment risk and country risk.

Republican lawmaker Andy Harris has sent a letter to US commerce secretary Gina Raimondo regarding the National Telecommunications and Information Administration's (NTIA's) requirements for its Infrastructure Investment and Jobs Act (IIJA) broadband programmes.

The letter expresses the US congressman's concerns about the letter of credit (L/C) requirement included in the NTIA's two new grant funding programmes to stimulate the rollout across the US of broadband infrastructure.

India's central bank has approved a second cohort of neo-banking companies in its regulatory sandbox programme that have proposed blockchain-based cross-border payment systems that could be used as an alternative to letters of credit (L/Cs) by some Indian exporters.

The Reserve Bank of India's (RBI's) approvals come amidst a dollar crisis in global financial markets, which has prompted some exporters to switch from open account to L/C terms to minimise payment risks.

Pakistan's finance minister, Miftah Ismail, has said he is not in favour of further relaxing restrictions on import letters of credit (L/Cs) imposed with the aim of protecting the country's depleted foreign reserves.

Initially, the State Bank of Pakistan incrementally restricted the flow of imports and limited the number of L/C approvals for imports of all products. The government subsequently decided to lift the blanket import ban, and permit the use of L/Cs by Pakistan's exporters that require foreign goods to continue production.

Best known for its activities in the energy, petrochemicals and textiles sectors, a subsidiary of Indian conglomerate Reliance Industries - the country's largest publicly traded company - has become India's second largest wheat exporter, despite a ban on wheat exports.

On 13 May, India announced a sudden ban on overseas sales of wheat except for exporters who already had letters of credit (L/Cs) for exports of the grain in place.

Standby letters of credit (L/Cs) are still the most popular collateral choice for captive insurance companies according to the senior vice president and manager of Comerica Bank's global and captive insurance group, Martin Ellis.

He says that usage of standby L/Cs is also continuing to grow amongst the insurance companies set up and wholly owned by non-insurance companies to act as a direct insurer or reinsurer for a parent company and its subsidiaries.