The Asian Development Bank (ADB), which recently pegged the world’s trade finance gap at $1 trillion, is launching a new trade finance tool aimed at combatting money laundering. Reports in The Financial Express on Tuesday (Sept. 4) said the ADB is launching its Trade Finance Scorecard, a solution to help interpret, implement and manage compliance with Anti-Money Laundering (AML) regulations and other financial regulations without curbing access to trade finance.
According to the ADB, the solution assigns a two-level score.
“Firstly, at a macro level, to identify characteristics of effective regulation that could be strengthened,” the ADB said. “Secondly, at a micro-transactional level, to highlight specific challenges that can be addressed in the shorter term.”
In a statement, Steven Beck, ADB head of trade and supply chain finance, said that AML and other regulations against financial crime are “critically important.”
“But these regulations can also undermine jobs and growth at small businesses and developing countries,” Beck continued, according to Xinhua news agency reports. “This new scorecard will open a channel of dialogue among stakeholders to help prevent crime and terrorism while financing growth and job creation.”
The ADB will examine regulations based on a set of criteria, including technology and data, design, risk alignment and consistency. Scorecards are developed based on feedback from the financial services and trade finance industry, and are designed to be “illustrative and directional,” said Beck.
The Scorecards supplement the ADB’s existing Trade Finance Program, which provides guarantees and loans to partner banks in an effort to expand trade finance. One of those partner banks is Citi, which announced an agreement last May with the ADB to share risk in trade finance transactions and facilitate $100 million in trade finance.
The ADB has been monitoring the trade finance gap for several years. Last year, the bank released a report, finding that the rise in FinTech in the trade finance space has had a minimal impact on addressing that gap.
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