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Trade finance is at a critical juncture. With an ever-growing $2.5 trillion trade finance gap and over 4 billion pieces of paper circulating in the global trade ecosystem, the industry is ripe for digital transformation.
Financial institutions and corporates alike must adopt technological advancements to remain competitive and compliant. Though there has been admirable progress in recent years, the industry needs to continue to innovate and not idly wait for someone else to take the initiative.
ClearTrade®: Highlighting the imperative for digital transformation in trade finance
Cleareye’s platform, ClearTrade®, is designed to transform trade finance operations by addressing key challenges and providing comprehensive solutions.
The platform’s digitisation module is at its core, converting unstructured trade documents into structured datasets using advanced Optical Character Recognition (OCR), Machine Learning (ML), and Natural Language Processing (NLP) algorithms.
This process not only boosts operational efficiency but also significantly reduces the risk of human error.
The digitisation of trade documents is crucial for several reasons. Firstly, it streamlines processes such as sanctions screening, Trade Based Money Laundering (TBML) assessments, workability checks, and document examination.
These datasets can be seamlessly integrated into trade back-office systems, enhancing operational efficiency. ClearTrade®’s classification and extraction accuracies exceed 93% and 88%, respectively, setting new standards in the industry.
Furthermore, the sanctions screening module within ClearTrade refines the process by categorising nouns in trade documents into corporate entities, vessels, locations, and individuals.
This refinement reduces false positives by up to 70%, optimising productivity and efficiency. The compliance and TBML module integrates a variety of checks, including maritime assessments and high-risk transaction evaluations, aligning with regulatory guidelines to ensure comprehensive risk management.
Addressing operational challenges, compliance and ESG
Trade finance is a manually intensive industry, burdened by paper and lacking standardisation. Banks face significant operational challenges, including potential losses from human error and a shrinking, highly specialised workforce.
Additionally, the increasing complexity of regulatory landscapes demands heightened vigilance and auditability, making manual compliance screening impractical and costly.
Cleareye’s solutions are designed to alleviate these pain points. The ClearTrade® platform automates critical compliance processes, from red flag checks and vessel tracking to Bill of Lading validation.
This automation reduces the operational burden on staff, decreases the required headcount for maintaining compliance, and delivers substantial cost savings.
In addition to operational efficiency and compliance, there is a clear need to address ESG compliance in trade finance.
While ESG has been an area of focus in recent years, there are better and more efficient ways to approach it.
ClearTrade®’s ESG module enables banks to assess transactions from an ESG perspective, track customer trends, and integrate ESG principles into their operations. This pioneering approach sets the stage for enhanced ESG compliance, fostering responsible business practices for both corporates and banks.
The platform evaluates transactions based on parameters such as buyer, seller, distribution, and use of proceeds. This enables banks to assess transactions from an ESG perspective and track customer trends effectively.
By integrating ESG principles into their operations, financial institutions can ensure they are conducting ESG-compliant business in trade finance. Cleareye’s innovative approach to ESG compliance in trade finance demonstrates its commitment to promoting sustainable and responsible business practices.
The path forward: Collaboration and innovation
Since its alliance with J.P. Morgan in September 2022, Cleareye has deepened its integration within the trade finance industry. Collaborations with trade back-office providers like Finastra and Surecomp, and cloud providers such as IBM and Microsoft, have helped shape industry standards and share knowledge.
Working with other cloud and technology providers, and major global banks, ensures that multiple industries and perspectives allows for the most comprehensive collaboration to occur.
This strategic approach involves thorough market research and direct engagement with Trade Operations and Compliance teams across different clients.
For example, by understanding the specific requirements of financial institutions, Cleareye can develop solutions that not only address critical customer needs but also maximise efficiency gains and mitigate compliance risks.
Case Study: Cleareye’s integration with global banks
These innovations are not hypothetical either, there have been multiple concrete examples of ClearTrade®’s impact within major global banks.
Specifically, ClearTrade® was used to enhance digitisation, compliance, and automated document examination modules within the bank. The results were transformative and highlighted the real-life efficacy of Cleareye’s solutions in addressing the industry’s challenges.
Details of the case study are below:
Digitisation Module
The Digitisation Module of ClearTrade® ingests trade document images to extract relevant data, eliminating manual entry and rekeying. Additionally, digitisation includes noun extraction from documents and de-duplication, enabling effective sanctions screening for restricted parties, vessels, and high-risk locations.
Benefits:
Enhanced processing power: The bank future-proofed its trade operations with advanced automation technology, enhancing processing power at a fractional cost compared to legacy systems or hiring additional resources.
Competitive advantage: Leveraging the platform’s machine learning capabilities, trained on a large volume of letters of credit (LCs) and documents, resulted in reduced false positives and a lower risk of human error.
High confidence data extraction: Achieved document classification and extraction rates of 98% and 93%, respectively, compared to the average of 65% observed in the legacy system, ensuring reliable data extraction at high confidence levels.
Cost savings: Realised $1 million in savings on internal tech expenses for data extraction and $300,000 savings for sanctions screening efficiency via reduction of traffic to existing enterprise sanctions screening software.
Compliance & TBML Module
The ClearTrade® Compliance Module utilises the data extracted from the Digitisation Module and employs a series of red flag checks, vessel tracking, Bill of Lading validation, and other risk control measures to ensure regulatory compliance for each transaction.
Benefits:
Operational efficiency: Enabled a 70% decrease in the required headcount for upholding global market standards in the bank’s trade operations function.
Cost avoidance: Avoided $1 million in costs for internal compliance build.
Annual savings: Achieved annual savings of $1.3 million on infrastructure, maintenance, and enhancements for compliance and auto document examination, plus $1 million in operational savings for compliance and auto document examination.
Auto Doc Exam Module
The ClearTrade® Auto Doc Exam Module leverages advanced technologies to interpret rules and conditions, validating them against LC presentation documents to optimise trade operations. It comes preconfigured with trade finance rules such as the UCP, ISBP, and URC, offering flexibility to customise the rules.
Trade finance is at a crossroads, with digital transformation offering a pathway to enhanced efficiency, compliance, and sustainability. The ClearTrade® platform exemplifies how advanced technology can address the industry’s most pressing challenges, from digitising trade documents to automating compliance processes and integrating ESG principles.
The message is clear: the time to future-proof trade finance is now.
Financial institutions must embrace technological advancements to stay competitive, compliant, and prepared for the future.
By leveraging advanced technologies and fostering industry collaborations, Cleareye is not only simplifying trade finance but also setting new standards for efficiency, compliance, and sustainability.
