Two international banking giants, Standard Chartered and DBS have joined forces to develop a new blockchain based solution that can be used to prevent fraud. The banks were forced to take this path after one of the participating banks, Standard Chartered was the target of a fraud causing losses to the tune of $200 million in 2014.
According to reports, in addition to Standard Chartered and DBS, even HSBC and Bank of America seem to have expressed interest in the technology. The distributed ledger platform christened TradeSafe has been already put into trial by the duo last year. The trial included about 60 invoices that were stored on the blockchain to test the capabilities of the distributed ledger. The banks have collaborated with Singapore’s Infocomm Development Authority to promote its usage.
The fraud that cost Standard Chartered $200 million where a Singaporean businessman used unrelated invoices for stockpiles of metal wrongly billed the bank for the money is not a one-off incident. Many banks face such fraud on a regular basis. The trade finance is reported to have increased in the recent years by over 20 percent. But most of these incidents go unnoticed as the banks are not always forthcoming with such news, in order to prevent the loss of trust among their customers.
Now, with the incorporation of blockchain technology, all invoices will be recorded on the blockchain which is distributed across the banks. This will make it impossible for the customers to present the same invoice to multiple banks to fraudulently gain financing for their activities.
While the current distributed ledger is still being tested by only two banks. Once operation, we can expect it to be used by various banks across the world. This may as well become another blockchain based service that complements the one being developed by the international banking consortium as an alternative to the existing SWIFT network for funds transfer.