Commerzbank announces plans to automate selected compliance relevant pre-checks in trade finance transaction processing by 2020

Commerzbank plans to automate around 80% of the selected compliance relevant checks of the bank’s trade finance processes by 2020. In October 2018, Commerzbank has started a pilot phase to automate the anti-money laundering processes which are an essential part of any trade finance transaction review. After an evaluation of the pilot phase, it is planned to roll out a further stage of the sanctions checks in trade finance during 2019.

Commerzbank, the leading trade finance bank in Germany, has begun a partnership with Conpend, a fintech company focused on solutions for trade finance operations. Conpend uniquely uses optical character recognition (OCR) and progressive machine learning to extract data from physical documents, recognise patterns and flag deviations. The machine learning component means that the software will constantly improve the identification of potentially non-compliant transactions as it is being used. It will use application programming interfaces (APIs) to connect to Commerzbank’s existing trade finance processing infrastructure and create a complete and detailed audit trail for the bank to front-run the increasing expectations of regulators with respect to reporting requirements.

The planned automation of selected and relevant compliance pre-check and sanctions check processes in trade finance refers to business operations only – the so called “first line of defence”. It does not affect any downstream internal oversight, compliance and audit processes of the Bank. The new business processes will improve efficiency and further optimise risk control procedures. Any compliance risks identified will be reported to the Group Compliance unit where they will be monitored and examined according to the established risk management, control and governance processes.

Enno-Burghard Weitzel, Head of Product Management Trade Services at Commerzbank, says: “The processing of trade finance transactions is becoming more complex and prone to higher risks, as manual processes struggle to keep pace with the increasing regulatory and market trends. However, we are leading the change towards a new era for trade finance processing. Our aim is to focus the expertise of our trade finance specialists to the crucial and complex parts of the business, while using artificial intelligence to improve efficiency and further optimise risk controls. This is not only a long-term plan, but something we are implementing now to enhance client experience by significantly reducing the time for transaction processing and the associated costs.”

Marc Smith, Founder and Managing Director of Conpend, says: “A growing part of the activity within a bank’s trade finance division is focused on crucial but routine activities that underpin the value-added services they provide to clients. This provides a huge opportunity to improve efficiencies and allow more focus on client servicing. I’m delighted to partner with the team at Commerzbank that shares the same vision of modernising the traditional elements of trade finance processing.”

The key role of financial institutions in the trade finance business is to facilitate international trade transactions between two or more parties by assuming and managing risks. The banks involved offer clients risk mitigation mainly by covering the payment risk and other physical and event risks in the supply chain between exporter and importer through products such as the letter of credit and bank guarantees. Thorough and flawless compliance and sanction screening processes are indispensable in the trade finance business in order to mitigate risks for the Bank and to meet the regulatory requirements. The rapid development of innovation such as automation and machine learning technologies allows a significant enhancement of trade finance processes.

Author: Yash Hirani

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