UAE launches Trade Connect blockchain-based trade-finance platform to combat fraud
The United Arab Emirates today launched a new blockchain-based platform called UAE Trade Connect that’s designed to prevent economic crimes such as under-invoicing, money laundering and fraud in trade finance.
The distributed ledger blockchain network was developed by UAE-based telecommunications company Etisalat and a consortium of seven local banks led by the First Abu Dhabi Bank. The system went live today after six months of trials and the overall project took two years from concept to delivery.
“UAE Trade Connect will be a game-changer for the trade finance space,” said Zulqarnain Javaid, who heads UAE Trade Connect.
Blockchain technology protects historical records of transactions by storing them in distributed, cryptographically hashed chains that can be independently verified and audited by third parties without revealing sensitive information. Once a record is submitted to a blockchain, it cannot be changed, and because blockchains are widely distributed, each ledger can be compared to the other, making counterfeit records easy to spot.
With UAE Trade Connect, fraudsters would find it more difficult to commit frauds such as attempting to receive payment multiple times for the same invoice. It’s easy with traditional paperwork, which is simple to counterfeit and difficult to verify. That’s why blockchain technology has been sought after for years as a potential way to make financial technology and supply chains more efficient.
Examples include Distributed Ledger Technologies Pte. Ltd., which raised $7 million in March, to upgrade its trade network, and we.trade partnered with IBM Corp. to use blockchain-enabled networks that connect businesses and banks to improve trade finance and lending processes.
As for supply chains, IBM and Maersk launched TradeLens, a blockchain shipping platform that lowers shipping costs in 2018. The Port of Rotterdam in the Netherlands piloted a blockchain-based shipping container handling project that increased safety and efficiency at the port. And AirAsia Group Bhd’s logistics arm Teleport launched FreightChain to transparently confirm and track air cargo using a blockchain.
Now that the trials are complete, the pilot program for UAE Trade Connect will focus on fraud detection, but the proponents of the technology believe it can be expanded to cover a lot more, such as catching money laundering and sanctions violations.
At a later date, added Javaid, the system could even begin to handle e-invoicing,” he said. “Such an update would require more partners to onboard, however, all of whom would have to sign onto the network to bolster its security. E-invoicing will need us to work with multiple partners.”
In time, UAE Trade Connect could be designed to handle bills of lading, letters of credit and bank guarantees, all of which involve working with ports, customs authorities, and governments. The documents can each be certified with cryptographic hashes that can be verified and audited on a blockchain transaction.
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