How can technology help AML teams to combat fraudsters?

01 August, 2023Joshua Downes

How far can technology go in preventing trade-based crime? Delegates at this year’s Annual Trade Finance Compliance Conference discussed several innovations and how they can be used by anti-money laundering (AML) teams to combat trade finance fraud, as well some of the challenges they present.


The conference was held under the Chatham House Rule, so speakers aren’t quoted directly. 

The cost of trade finance fraud

Trade finance is a hugely important part of the global economy, but it’s also a big target for fraudsters. There have been a number of high-profile cases of trade finance fraud which have cost banks and businesses significant amounts over the years.

In 2019 the Agritrade fraud scandal, for example, resulted in bank losses of nearly $470m. Then there was the 2020 Balli Group case, in which two executives of the steel trading business used misleading information, forged shipping documents, and fake sales contracts, to deceive banks, resulting in a $500m fraud.

Major cases such as these have highlighted the need for banks to have strong AML programmes in place.

But can tech give AML teams the upper hand over trade finance fraudsters?

Is AI the solution to trade finance fraud?

There are several technologies being put to good use in making the trade finance sector more resilient to fraud. During this year’s ATFCC, one delegate referred to AI-powered tools that have already allowed for more stringent checks when it comes to trade transactions.

“In the past, different people would be looking at different information sources and perhaps not recognise things that, in combination, added up to red flags. Now we have an [AI-powered] tool that can check this for us,” the speaker said.

Whilst human error will always be a factor, technology such as the tool described can take some of the manual checking processes out of human hands and pull together data much more effectively than a human operator. Ultimately, this will mean more errors and discrepancies are picked up.

Using tech to check cargo

The speaker also discussed physical technologies that have the potential to combat fraudulent activity.

“An interesting piece of technology is the drone,” they said. “We all know it’s very difficult to check inside containers because they’ve been sealed and you can’t access them that easily. But, once the goods are stored in a warehouse, you can send in a drone, fly it through the warehouse and count bags or calculate volume.”

“Similarly, there is a pair of smart glasses which have advanced functions and can look into a stockpile or soybeans, for example, and analyse them for moisture etc. These glasses can also be used to assist [TF professionals] in analysing cargo.”

“So, there is technology out there that can assist [firms] to identify what it is they are actually financing,” the speaker added.

What are the challenges in using tech to combat trade-based fraud?

Whilst there are several technologies that have the potential to help reduce trade-based fraud, there are still several hurdles to overcome in ensuring these technologies are used effectively.

“I think technology definitely has a big role to play,” another of the ATFCC speakers said, during a panel discussion on leading practices for AML teams. “But where firms have to be careful is in remembering that technology, no matter how advanced and expensive, will not solve problems if the people using it do not understand the risks involved.”

“Understand what the risk is, then find the right tool,” they said. However, the speaker noted that “this can be a challenge in itself, as there’s so much technology out there it can be hard to figure out which tools to invest in and how to use them effectively.”

They added that “often companies will spend money on expensive tools, but then find they don’t pick up certain issues because they didn’t calibrate the tools correctly.”

Getting the data right

Many new and emerging technologies – particularly AI-based tools – require data, and large amounts of it. So, as much as technology needs to be used appropriately for it to be effective, these advanced tools also need accurate data.

“If we look at the trade and banking world, there is a lot of data,” one ATFCC delegate noted. “When we’re talking about mitigating risk, we need to look at what data is available to do that.”

“One of the biggest and most important things that we want to be able to do is to have correct data to allow us to use the technologies available today, like AI, to do better than what we can do when it comes to rapidly crunching data.”

“We need to know what the best data is and how to harvest that data – because, as we say in technology, if you have garbage in you have garbage out,” the speaker added.

There are numerous ways in which technology can help reduce fraud and other trade-related crimes, but to maximise the effectiveness of these new technologies, trade finance professionals need an in-depth understanding of the potential risks and which parts of the trade process are most susceptible to those risks. This understanding will mean they have a better chance of choosing the right tools for the job.  

Related content

Read more about our trade and transaction banking qualifications