BLOCK-CHAIN A Nirvana for Trade Risk & Finance Presented by: By: H.C.Barke President & C.E.O. CPCU(USA SA), ARe(USA), AMIM(USA), AIC(USA), MWWHIS(U S(USA SA), ACII(Lo Lond ndon on), AIRM(Lo Lond ndon) n), Chartere ered Insurer( rer(Lo Lond ndon) n), FIII, AIII(Gene neral ral), AIII(Mari rine) e), B.Com(Fina inanc nce), MBA(Mark rketi eting) g), LLB, Member r of Society of Technic nicia ians ns in Insura ranc nce e (London on), MCPCUS(USA), Dipl. King ’ s College l. Da Vinci ’ s Vitruv ge, Cambridge e (London on), Dipl. uvian ian Man (London) n), Dipl. Pi (London on) Certifica icate e of Distinc inction n (Insura uranc nce & Risk Managem ement nt) IBC, Cambridge ge (London) n) st Century ’ , IBC Cambrid e ‘ 2000 Outstand als of 21 st Certifica icate anding ing Intelle ellectu ctuals idge e (London on) e ‘ Intern al Who ’ s Who Historic oric Society ’ , USA Certifica icate ernat ation ional Prudence Insurance Brokers LLC – UAE, USA, UK barke@prudence-ae.com; +97150 7700509 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
World Merchandise Exports USD 11.2 Trillion poised to touch $ 19 Trillion by 2020 9 Feb 2011 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
TRADITIONAL PAPER-BASED TRADE CREATE INEFFICIENCIES With export and import trade shipments requiring an average of: 36 original documents, 240 copies and the involvement of 27 entities, Fortune 500 companies incur more than $81 billion of unnecessary supply chain and working capital costs each year due to 9 Feb 2011 inefficiencies and lack of visibility. 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
Where things went wrong 1. Quingdao Metals Fraud – multiple financing of same inventory 2. Shell Companies 3. Circular Trade 4. Bogus Trade Documents 5. Multiple financing of invoices 6. Inventory fraud 7. Sanctions exposure 9 Feb 2011 8. Disputed Debts 10 th Global Supply Chain and Logistics Summit 4 22 Nov 2017 www.sclgsummit.org
1. QUINGDAO METALS FRAUD Multiple financing of same inventory DECHENG GROUP Standard Chartered Plc, lost almost $200 million from a fraud at China’s Qingdao port. 10 th Global Supply Chain and Logistics Summit 5 22 Nov 2017 www.sclgsummit.org
2. SHELL COMPANIES as DEBTORS A large + 5 billion TO mobile phones trader in Dubai – similar modus operandi involving +20 related and Indirectly held and controlled companies ………… . +AED 2 Billion A large +$ 500 mn. TO Commodity Trader in DMCC – shell company in Africa 10 th Global Supply Chain and Logistics Summit 6 22 Nov 2017 www.sclgsummit.org and involved with Shri Lal Mahal Basmati Rice – Little Rose General Trading … .+$5 mn. fraud
3. CIRCULAR TRADE FRAUD GLINTS GLOBAL, DUBAI Modus Operandi 10 th Global Supply Chain and Logistics Summit 7 22 Nov 2017 www.sclgsummit.org
Trade Finance Risks Transaction Finance Inventory Finance +/ 1. Physical presence of goods/inventory 1. Counter-party – Buyer & Seller 2. Title of goods 2. Goods 3. Quantity & Quality of goods 3. Purchase Order & Confirmation 4. Contract of Sale – Sharing ‘SMART CONTRACT’ to BANK 5. Goods Inspection – Quality & Quantity Certification – On ‘SMART CONTRACT’ by Independent Agencies 6. Commercial Invoice Issuance by Seller 7. Transport documents & effective Title of Goods 8. Transport Tracking 9 Feb 2011 9. Delivery & Delivery Confirmation – ‘DIGITAL ACKNOWLEDGEMENT’ 10. Commercial Invoice Acceptance by Buyer 11. Payment – Automated payment via ‘SMART CONTRACT’ 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
SCF PLATFORM – A ROBUST SOLUTION 9 Feb 2011 BANK 10 th Global Supply Chain and Logistics Summit 9 22 Nov 2017 www.sclgsummit.org
10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
DISTRIBUTED LEDGER TECHNOLOGY (DLT) Key advantages DLT make trade transactions – immutable (unchangeble), incorruptible and irreversible. Trade payments could be made swiftly on a single, robust, tamper-proof ledger shared among participants – companies (buyer & seller), shipping company, 3PL , banks etc. Full transaction details with supporting enriched data could be immutably linked to a transaction to allow easier, more accurate auditing of supporting documentation for a payment. Immensely support Supply Chain Finance & Trade Receivables Finance to optimize Working Capital efficiency thru : 1. Dynamic Discounting ; 2. Reverse Factoring ; 3. Factoring ; & 4. Securitization. 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
Thank you 10 th Global Supply Chain and Logistics Summit 22 Nov 2017 www.sclgsummit.org
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