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Partner Robert Parson has written an article published by both Finance and Credit Law and Trade Treasury Payments titled: “Fraud Prevention in Trade Finance – Lessons Learned and Lessons Forgotten.”

Trade finance remains one of the lowest loss asset classes globally, underpinned by robust legal structures, mature market practice and increasing participation from private credit and non-bank lenders. However, recent high-profile frauds demonstrate that long-established controls can still fail when discipline and vigilance weaken.

Fraud typically exploits operational complacency rather than structural flaws, with perpetrators taking advantage of gaps in monitoring, documentation, and ongoing credit oversight.

The article looks at the following:

  • Strong foundations are not enough: Trade finance structures are generally sound but require continuous application of core principles including the verification of underlying goods, enforceability of security and authenticity of receivables.
  • Fraud evolves with opportunity: Common schemes include fictitious invoices, duplicate financing, over-invoicing and collusion between buyers and sellers, often masked by apparently normal trading patterns.
  • Ongoing monitoring is critical: Many major losses (including “end-of-life” frauds) occur where lenders failed to identify behavioural changes, deteriorating accounts or irregular reporting.
  • Technology is supportive, not decisive: AI and analytics can enhance monitoring, but effective fraud prevention still depends on active engagement, borrower understanding, and consistent enforcement of covenants.

Recent collapses in global trade finance highlight that even sophisticated lenders can be exposed when vigilance fades. The core lesson remains unchanged: prevention depends on disciplined execution, curiosity and continuous scrutiny throughout the life of the facility.

The article can be read in full on TTP’s website, here.