As we work to embed the access of trade finance capital for our customers and the whole logistics industry, we can't leave one of the most important pieces behind security. And even though we vouch for the benefits of implementing the right technology in this sector, the involvement of trusting human connections and the addition of security layers are key in making sure trade finance transactions are safe and reliable.
How important is security in Trade Finance Transactions?
To demonstrate the importance of a thorough vetting process aligned with the inclusion of various security-focused processes in our due diligence - we want to share a recent case study where we were able to mitigate the risks of scam in a transaction.
Bau Developers is a company dedicated to the construction of new residences in Panama. Although they have bank financing, land purchase, and the construction through letters of credit, they had issues with several purchases where the sellers did not accept Letters of Credit and demanded payment before the goods were transported.
They applied to our Trade Finance solution for about $20K using the merchandise as collateral and putting us in contact with the provider. After going through the beginning steps of the vetting process, we sent out the first deposit to their account and received confirmation of the receipt of the transfer.
Here's what happened.
ConsolFreight's Trade Finance Solution:
Understanding the challenges, a large freight forwarding business, member of the Forward Together Network in Panamá, initiated the transaction for Bau Developers
They contacted ConsolFreight for a solution.
Recommendations and due diligence were conducted to ensure the security of the transaction.
Financial terms were agreed upon.
After various email exchanges, a discrepancy was identified. The email account of the manufacturer had been hacked and there was a risk for a scam.
The security measures implemented by ConsolFreight were able to identify the issue, contact the person in charge, and continue the transaction in a safe environment.
Once the cargo was loaded and clean onboard, The origin freight forwarder, who is also a member of the Forward Together Network, was able to issue a Bill of exchange (B/L) so Bau Developers were able to open a Letter of credit to ConsolFreight to settle the payment.
In hindsight, we're certain that our security process that also involves trusted human connections - our freight forwarding agents- were key in making sure this transaction was successful. We were quick to identify any discrepancies and communicate with the right person in time to avoid the risks of a scam or malicious actions.