Trade Finance: The importance of adapting to the changing market

04 November, 2016
Trade Finance Qualifications Relationship Director, David Morrish, met with trfnews to discuss the importance of trade finance qualifications for professionals in the industry and what The London Institute of Banking & Finance is doing to adapt to the ever-changing market and regulatory requirements.

 

David Morrish, Trade Finance Qualifications Relationship DirectorWhy do you think it is important for professionals working in trade finance roles to attain a professional qualification?

A genuine long held view of mine is that anyone, in any profession, should be qualified in what they do. If you went to see a lawyer, an accountant or an architect, you would expect them to be qualified. Trade finance is no exception.

I’m not suggesting that it’s more complex than any other areas of finance, but it is certainly different, and people do need to understand how it fits together. As a discipline, we have been typically somewhat coy about the depth of our knowledge and understanding of international trade. One way we can push ourselves forward is by becoming qualified in what we do, and by proudly using our professional designations at every opportunity. It is good for me to see that people around the world are increasingly studying for qualifications in trade finance and that when they have taken the time to study for these, that they let the industry know that they have them.

An example of positive feedback I received about the Certificate for Documentary Credit Specialists (CDCS®) course came from a successful candidate at senior executive level in one of the major banks. He had taken the exam twice having failed on his first attempt and his experience helped him really appreciate the challenges that his staff faced and the complexity of what they had to deal with on a daily basis.
 

Who are the trade finance qualifications aimed at?


We offer two specialist qualifications; one is the above mentioned CDCS®, and the other is the Certificate for Specialists in Demand Guarantees (CSDG®). Both qualifications are aimed at practitioners in the highly technical areas of letters of credit and demand guarantees. Many work in support areas in international trade finance banks, but we also have a number of successful candidates from major manufacturers who want to increase the level of expertise staff in their export departments have  to the same standards of those working in trade banks.

For all staff engaged in the processing of letters of credit and other trade instruments, the greater their skill levels, the greater benefits they bring to their organisations in terms of efficiency and effective management of risk.
 
We also offer the Certificate for International Trade and Finance (CITF®). This provides students with a general introduction to all aspects of international trade, including methods of payment, financing and risk management such as foreign exchange hedging and credit insurance.  It is aimed at staff in financial institutions in both client-facing and in supporting roles and also at exporters or importers who need a greater level of understanding.
 

What role do you think The London Institute of Banking & Finance’s trade finance qualifications have in helping to facilitate international trade?


I can draw upon my own experience here, as I worked in a trade finance environment with Lloyds Bank for many years and routinely discussed clients’ international trade finance requirements; these clients ranged in size from SMEs to major corporates. SMEs, in particular, did not always have an appreciation of the risks and complexities that come with exporting and importing. This lack of knowledge can be a real barrier to the fluidity of trade deals, as many people are reluctant to become involved in exporting unless they understand the fundamentals and the risks they are undertaking and how these may be mitigated.
 
In this sense, gaining a ‘step change’ in the knowledge and understanding of trade finance through a professional qualification helps enormously in providing clients with the service they need.
 
This is something I feel passionate about. SMEs often have their hands full managing their businesses and, like everyone else, if they do not know about the features of trading internationally they will be tempted to push it aside, resulting in lost opportunities in terms of new markets and increased sales. A lack of knowledge can therefore be a huge barrier to international trade that should not be underestimated.
 

How is The London Institute of Banking & Finance developing qualifications for the market and regulatory requirements?


The regulatory environment surrounding international trade has been around for some time but it has never been in such a sharp focus as it is today. As regulation continues to mature, trade finance is seen as another area in which fraud and financial crime must be combatted.  In 2013, the FCA conducted a thematic review of banks’ control of financial crime risks in trade finance and published its findings. In this it highlighted best practices that all banks should be following to minimise criminal activity.  The review highlighted how trade could be used to facilitate money laundering or even terrorist activity whereby traded goods could have a dual purpose- peaceful or non-peaceful. Considering this, banks have a role to play in their social responsibilities and there are now intense pressures from the regulator on how banks should train their staff to uphold this responsibility in their practices. In this sense, we could be providing support in this specific regulatory area and this is something we are working on.
 
One of the key issues that we are very aware of is that there are different regulations in different parts of the world. The principles of these regulations, however, are very similar, as they all require personnel in trade finance to look out for the same ‘red flags’ in identifying potential risks and take appropriate action.
 
Sanctions compliance is also an important aspect to bear in mind. It is obvious to many trade finance professionals that they must be aware of compliance practices in their own country, but it is also important to be aware of compliance sanction regimes in foreign countries, which may impact your business. For example, if you want to trade in US Dollars, you must be aware of US sanctions regardless of your geographic location if you do not want to feel the wrath of US regulators.
 
The bar has been raised high in the regulation of the financial services industry and it won’t be getting lower anytime soon. It is therefore key for banks to ensure they understand both their regulatory and social responsibilities by way of education and training. By doing so, they can help create an environment that fraudsters simply do not want to operate in.
 
What is the current trend for courses and what are your predictions for the future?
Thousands of candidates now sit our qualifications each year and we currently have students in more than 90 countries around the world. A significant number originate from south-east Asia where our documentary credit qualification is particularly popular. Not surprisingly this ties in with the volumes of SWIFT traffic for both import and export letters of credit (MT 700 type).
 
Given that, by definition, the nature of trade is international, we are seeing interest in education in trade from all corners of the globe. Africa is increasingly important for us and we have recently appointed someone based in Lima to market our qualifications in Latin America. Generally creating awareness of what we do and what is available is vital to our success and we work hard to get our message across. It takes time but it is worth it.
 
The courses that we offer are consciously generic and therefore relevant internationally. All three of our trade finance qualifications are endorsed by the ICC with whom we have worked in partnership for many years. As I have mentioned, I am passionately committed to training individuals in their profession, and I believe qualifications are a brilliant way of getting people to achieve a wide understanding of the subject. It is also a way of giving these individuals personal prestige, status and confidence when facing clients and should also give those clients comfort that they are dealing with someone that really does know what they are talking about.
 
In trade, as in everything else, change is constant; indeed it is the norm. One of our challenges is to ensure that everything we deliver and are planning for the future remains current and relevant.

Learn more about our Trade Finance qualifications