BAFT Comments to UNCITRAL on Guidelines for International Identity Management

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At the end of April 2022, the United Nations Commission on International Trade Law (UNCITRAL) released their “Draft Model Law on the Use of Cross-border Recognition of Identity Management (IdM) and Trust Services“. BAFT received a Request for Comment, with a May 27, 2022 submission deadline.

BAFT Endorses UNCITRAL’s Efforts

The need for the establishment of the IdM cuts across numerous facets of international transaction banking including trade finance, supply chain finance, payments, and areas of compliance such as Know Your Customer (KYC) and Anti-Money Laundering (AML). The process of establishing standards in the universal acceptability of the IdM is also at the core of the digitization of trade initiatives. Accordingly, BAFT fully endorses UNCITRAL’s efforts in formulation of the Draft Model Law.

The Draft Model Law confirms that the international dimension is essential to the use of identity management and trust services and more generally, of electronic services. However, the text confirms that there are two obstacles: i) technical incompatibility leading to a lack of interoperability, and ii) legal obstacles to cross boarder recognition.

BAFT Advocates for GLEIF’s LEI

To provide direction on overcoming these two obstacles, BAFT advocates for the implementation of the work already done by the Global Legal Entity Identifier Foundation (GLEIF) in the establishment of the Legal Entity Identifier (LEI). The LEI is a global ISO 17442 standard that connects key reference information and enables clear and unique identification of legal entities.

Digital transformation in global transaction banking is capable of reducing costs, improving efficiency, better regulatory control with less risk and collaborative opportunities for stakeholders in the global economy. The LEI is the only global standard for legal identity identification which is why BAFT has endorsed its inclusion in the Draft Model Law.

Read the Full Comment Letter Here >

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Via Trade Finance Global

TFG was delighted to partner with BAFT for their 2022 Global Annual Meeting in Washington, DC. Throughout the three day event, attendees heard from many experts discussing the current state of the industry, what they learned during the past few years, where the industry is headed, and the challenges and opportunities that lie ahead.

BAFT’s Role in Implementing ESG Best Practices for Trade and Transaction Banking

There is certainly a lot of ground to cover with regard to establishing robust definitions and standards.

BAFT has established its own working group to explore these but is also collaborating with the ICC and others to ensure that there is a clear set of definitions for ESG in a transaction banking context. 

Once standards are established, the next step is to develop the reporting and KPIs; these are where the real benefits come in but you must have the standards and definitions first. 

“BAFT has a group looking at what types of reporting should be done, what the relevance is, and what KPIs should be used,”

Tod Burwell, President & CEO of BAFT

The COP26 net-zero alliance has been working towards creating a carbon-neutral environment, but their work does not have a transaction banking context to it – which is something that the BAFT working group is hoping to address. 

The last piece is to educate the stakeholders, policymakers, and advocates so that any policy we end up with do not exclude certain markets. Not all parts of the world live in the same circumstances so any policy needs to be carefully designed to not exclude anyone.

Many experts also warn about implementing solutions that are policy-led rather than client-led.

Statistically, 80% of carbon emissions are generated by G20 countries, so it does not necessarily make sense for policies generated for this advanced minority to be applied to the geographies that only generate the 20% of emissions. 

Globalization is Here to Stay 

There has been substantial discussion recently about the fragmentation of global markets into regional trading blocs. 

While this may occur, there is no doubt that some degree of globalization is here to stay. 

There are certain countries, like Korea and Germany for example, that naturally do not have very many of their own commodities, meaning that they are forced to source these on a global basis. These countries also tend to have specialized economies that rely on global exports and trade.

This reliance from many different economies on global markets means that globalization will not go away any time soon. 

Energy Transition Agendas

All the talk about carbon emissions and the need to transition to green energy has created a sense of urgency in the industry. Unfortunately, it is simply not feasible to transition to zero-carbon overnight.

Too many countries have energy infrastructures so heavily reliant on brown energy sources that they will need to spend years, if not decades, building up green energy infrastructure.

We do need to start the transition as soon as possible, but we also need to be cognizant of the required timelines for an effective transition. 

It is also important to bear in mind that a lot of companies, especially smaller companies, do not have massive amounts of resources to commit to making a green transition. 

“Many small and medium-sized enterprises globally, although agile and adaptable, may face difficulties in developing an ESG strategy or have little data and know-how to supplement this.” 

Manish Kohli, Global Head of Liquidity and Cash Management at HSBC

“They are often less advanced in transition planning compared to larger multinationals, meaning they require a different approach and a different level of support.” 

The Incentivization of Preferential Financing

Preferential financing is when a bank agrees to offer a lower rate of financing to a client so long as that client adheres to a certain set of green commitments. 

The idea, in theory, is to financially reward companies that stick to their green commitments.

Some of the banking leaders at the conference fear that, despite being a noble concept, it may not work as well in practice. This fear stems from the idea that such a model misaligns the green incentives from the financial ones. 

While banks would like to see their clients succeed in their green commitments, under a preferential financing model, not only will a bank not receive any immediate financial benefit from going above and beyond to assist in these efforts, but doing so may actually cause them to lose revenue in the short term.  

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Via Trade Finance Global (TFG)

In April 2022, BAFT named Deepa Sinha as its new Vice President of Payments and Financial Crime. TFG’s Deepesh Patel interviewed Sinha to learn what led her to the association, her view on fighting financial crime, and her insights into the progress made in the payments space.

About Deepa Sinha

Deepa Sinha has been in the finance and treasury space for more than 25 years now, in both corporate and bank settings, accumulating a perspective on what’s needed from both.

During that time, she has worked for large banks such as Capital One and been on the advisory councils for J.P. Morgan, Wells Fargo, Bank of America, and Citi.

She also spent some time working for large corporates like the Carlyle Group and Caliburn International (now Acuity International), as well as non-profits like AARP.

Much of her experience lies with the implementation of treasury management systems and enterprise resource planning systems integrations, leading internal IT and business teams, and working with various internal and external stakeholders to build consensus and accomplish objectives.

PATEL: What led you to join BAFT and head up payments and financial crime?

SINHA: BAFT is the organization that international banks active in transaction banking look to for industry best practices, solutions, advocacy, policymaking, and knowledge-sharing.

I have been in the finance and treasury space for more than 25 years now and BAFT will provide me with an opportunity to fill an advisory role to our members on not only what their clients are looking for, but what is developing in the space, and how it can affect them and their business.

As technology advances and various international policies and regulations evolve, BAFT offers the knowledge and capabilities in this space to be ahead of those evolutions and advancements.

That’s why I wanted to join BAFT.

Fraud and Financial Crime

PATEL: What has been the impact of the pandemic on financial crime?

SINHA: The pandemic has been a time for both challenges and opportunities, with regard to financial crime, and associated regulatory compliance.

If we look at the data behind financial crime patterns, there is an uptick in cybercrime, which corresponds to an increase in electronic commerce and payments. The efficiency of newer payment methods presents an opportunity and a challenge for banks, regulators, and organizations like BAFT to strengthen regulatory compliance.

There is much work to be done, but the incredible team at BAFT is positioned well and has the ability to work closely with our members, partners, and policymakers in continually striving for success in these areas. 

PATEL: The trade industry has suffered some serious fallbacks due to fraudsters and issues around money laundering. Do you expect to see this increase moving forwards?

SINHA: We see trade-based money laundering and fraud as two distinct problems that require different solutions.

In most instances, trade-based money laundering is separate from trade financing and takes advance of fragmentation in the value and payment chains. Banks alone cannot solve this – it requires collaboration with customs, shipping companies and other stakeholders. Banks are using artificial intelligence and other tools to get better at mitigating money laundering, but it remains a stubborn problem.

As payments get faster and more frictionless, the risk increases. Fraud, however, is heavily driven by paper-based processes and we are seeing improvements in mitigating fraud as technology solutions are increasingly implemented.

As digital identity becomes more widespread, and duplicate financing solutions gain more traction, fraud mitigation will improve even further. However, we know that criminals constantly find new ways to evade the law, so we have to remain diligent. 

PATEL: Although within the industry there is a general consensus that regulation, reporting on and fighting financial crime are important, it’s also time-consuming, costly, and potentially at the cost of serving smaller MSMEs. How do we tread the line?

SINHA: As in everything, balance is the key. In order to protect assets and interests, and prevent financial crime, regulations, compliance, and due diligence are quite necessary.

However, in finding that balance, we also want to make sure that those same regulations, compliance, and due diligence responsibilities are not overwhelming, especially for smaller and medium-sized companies.

There still has to be some collaborative work between banks and regulators to fine-tune the “risk-based approach” to compliance. BAFT is committed to working with our international banks to understand and lessen the challenges associated with compliance, and also working with regulators to advise how ineffective regulations pose a hindrance to conducting business and actually increase overall risk. 

Progress in the Payments Space

PATEL: Has the pandemic accelerated the need for FIs to speed up and innovate in the payments space (real-time 24-7-365)?

SINHA: Not only did the pandemic accelerate the need for financial institutions to speed up innovation in the payments space, but it also accelerated the deployment of innovative solutions and adoption by corporate clients. 

Across the board, the name of the game is digitization. How we interact with the world as a populace is primarily online now, from shopping to groceries to paying our bills and both the banks and the clients they serve have responded accordingly.

With the advent of real-time payments from customer to customer, now business to business and between businesses and their customers, we are seeing an acceleration of the real-time-payment revolution.

Various markets in Asia were early adopters followed by Europe, but we’ve seen an acceleration in Latin American and North America on the domestic level. The next major innovations will be in real-time cross border payments.

PATEL: Where is the payments space in terms of adopting best practices and standards?

SINHA: Some elements of best practices – such as straight-through rates, payment times, reporting, and digital deployment, offer competitive advantages, so firms are constantly driving towards what they believe is best practice.

At BAFT, we focus more on standards and best practices for functions that are common and necessary for a healthier ecosystem, such as interbank transactions and risk management.

In that regard, our members are very active in collaborating through our committees and working groups. The community is very engaged in driving towards new standards such as ISO 20022 and working with providers such as SWIFT and other payment service providers that offer technology solutions that improve on current practices.

The Road Ahead for BAFT

PATEL: What are your missions and objectives at BAFT over the coming months?

SINHA: First on my list, as well as an ongoing goal, is to be at the forefront of new payments capabilities as they develop, as well as the policies and regulations that guide them, and be able to disseminate that to our members as quickly as possible.

My goal is to assist our members in achieving optimum productivity by leveraging technology and industry best practices in operational efficiency.

I also want to entrench myself as a subject matter expert on the challenges that our members are facing in the area of financial crimes, policies and regulations that govern them, and how to tackle those challenges head-on, with new developments and solutions in technology to prevent financial crimes before they happen, and to solve for them when they do.

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CBDCs should complement, not replace, existing forms of money, according to leading officials at BAFT’s 2022 Global Annual Meeting.

Via Financial News

As central bankers in advanced economies consider launching their own digital currencies, top officials have warned that CBDCs should not replace existing payments systems entirely.

“The legacy system has been worked at diligently and hardened for decades,” Robert Bench, Assistant Vice-President at the Boston Federal Reserve, told a BAFT (Bankers Association for Finance and Trade) conference on 3 May.

“What we want to do is understand what are the costs or the benefits [of a CBDC], but not disrupt anything happening in the steady state, because so much work has gone into making the money system so secure.”

The Boston Fed has partnered with the Massachusetts Institute of Technology to investigate the technical feasibility of a digital dollar in an initiative dubbed Project Hamilton.

Bench said he was not yet confident that a digital dollar was technically possible.

“There’s no higher stakes than the US dollar. So to understand technical feasibility, the level of hardening you have to do so that institutions are comfortable offering these services to clients, that’s a long way away,” he said.

Tom Mutton, Director of Fintech at the Bank of England, said the Bank would be agnostic on potential use cases and business models for any CBDC.

“We should be in the infrastructure game, rather than the product game,” he told the conference.

The Bank has also partnered with MIT, entering into a one-year research agreement with the university to look at the technical challenges and opportunities of CBDCs.

In most advanced economies, central banks are either exploring or are in the early stages of developing a CBDC. Some 89 countries accounting for 90% of global GDP are currently looking at developing a CBDC according to the Atlantic Council, a Washington-based think-tank.

In April, the Bank and Treasury announced a CBDC taskforce to better coordinate research into a digital pound.

The increased attention around a CBDC does not mean one is on the horizon, however; the Bank has said not to expect a digital pound before 2025.

Both the Fed and the Bank are still in the research phase, and both central banks have said they would require approval from elected officials before moving onto the design phase.

A major concern that central banks have raised when discussing CBDCs is the potential of undermining the traditional systems fractional reserve banking and commercial money.

Mutton said the goal of the Bank’s potential digital pound is not to become the dominant form of money, but to serve as another payment option for consumers as cash use continues to decline.

“What we don’t see is a world in which a [CBDC] is the only form of money we use,” he said. “The predominant form of money we use to buy our groceries and go on holiday and anything else is currently commercial bank money. As we have a more digital economy and as we have lower levels of cash use, we continue to explore the case — or not— for making central bank money available in digital form.”

But while the Fed and Bank continue with their research, other jurisdictions are pressing ahead.

China’s e-CNY has been piloted in a number of cities around the country and was given a high-profile test run at this year’s winter Olympics. The People’s Bank of China reported that during the two-week sporting event, around $315,000 worth of e-CNY transactions were processed everyday.

European Central Bank president Christine Lagarde said the advanced stage of China’s CBDC project has spurred the ECB to move faster on its own digital euro project.

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The 2022 TFG International Trade Awards were awarded at the 2022 BAFT Global Annual Meeting covering seven global categories, seven markets, six specialist categories, and two individual categories.

LONDON/WASHINGTON –Trade Finance Global (TFG) announces the winners of the 2022 International Trade Awards in cooperation with BAFT. Now in its sixth year running, the TFG International Trade Awards 2022 recognize those who have provided an outstanding contribution to global trade and finance.

This year’s winners were announced at BAFT’s 2022 Global Annual Meeting in Washington, DC on May 4. BAFT would like to congratulate this year’s winners.

Global

  • Best Trade Financier – Citi
  • Best Receivables Financier – ING Bank
  • Best Supply Chain Financier – Citi
  • Best Export Credit Agency – UK Export Finance (UKEF)
  • Best Multilateral Development Bank – African Export–Import Bank (Afreximbank)
  • Tradetech Innovator Award – Surecomp
  • Sustainable Trade Finance Award – European Bank for Reconstruction and Development (EBRD)

Regional

  • Best Trade Financier in Western Europe – Commerzbank
  • Best Trade Financier in Central and Eastern Europe – Raiffeisen
  • Best Trade Financier in the Middle East – First Abu Dhabi Bank (FAB)
  • Best Trade Financier in Africa – Rand Merchant Bank
  • Best Trade Financier in Asia Pacific – Bank of China
  • Best Trade Financier in North America – J.P. Morgan
  • Best Trade Financier in Latin America – Santander

Specialist

  • Best Trade Finance Deal of the Year – Allen & Overy
  • Best Trade Finance Education Provider – London Institute of Banking & Finance (LIBF)
  • Best Trade Finance Law Firm – Sullivan Law
  • Best Trade Credit Insurance Provider – AIG
  • Best Islamic Financier –  International Islamic Trade Finance Corporation (ITFC)
  • Trade Digitization Award – Enigio

Individuals

  • Outstanding Contribution to Trade Finance – Steven Beck, Asian Development Bank (ADB)
  • Rising Trade Finance Star – Haitham Elsaid, Qatar National Bank Al-Alahli

Read the Winners’ Interviews Here >

TFG would like to thank all nominations for all 22 categories across seven different markets, and 18 judges of the steering committee for what was a challenging judging process. TFG takes great pride in making the awards as impartial as possible.

Mark Abrams, Head of Trade Finance, TFG said:

“We are proud to award outstanding companies and individuals for their contribution to the trade finance industry over the past 12 months, which have been far from normal.”

“Now in its 6th year running, we’re delighted to collaborate with BAFT and would like to thank our independent steering committee for their time and efforts in running the rigorous judging process.”

Scott Stevenson, Senior Vice President of Trade, BAFT said:

“BAFT is extremely honored to be taking part in this year’s TFG International Trade Awards and appreciates the opportunity to recognize industry leaders in trade, supply chain and receivables finance.”

TFG Media Contact:
Deepesh Patel
Director, Partnerships and Marketing
[email protected]
+44 (0) 750 739 8018

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WASHINGTON – BAFT, the leading global financial services association for international transaction banking, today announced the graduates of its Future Leaders Program Class of 2022. The program – now completing its seventh year – recognizes upcoming leaders in the global transaction banking industry. The Future Leader graduates were honored at an in-person ceremony in Washington, DC on May 4 as part of BAFT’s 2022 Annual Global Meeting.

Nominated by their respective institutions, the class of 2022 included 35 individuals from 22 countries across six continents representing a variety of disciplines within transaction banking. This year’s group was divided into five project teams to address current industry issues including commercializing data, CBDCs, sustainability, digitizing trade finance, and ISO 20022.

“We are incredibly proud of this year’s Future Leaders class,” said Tod Burwell, President & CEO, BAFT. “Though the pandemic prevented them from meeting in-person at the beginning of the program, this cohort showed great resilience and commitment to their teammates and respective projects. With the graduation of the 2022 class, the BAFT Future Leaders program now has more than 200 transaction banking leaders amongst its alumni.”

BAFT Congratulates the Following Graduates from the Class of 2022:

  • Ahmad Hamza Hashmi, International Islamic Trade Finance Corporation (ITFC)
  • Akshat Jain, ANZ Banking Group
  • Alejandra Basañez Coppola, Banco Mercantil del Norte (Banorte)
  • Aluwani Thenga, Rand Merchant Bank
  • Anum Chaudhary, Bank of America
  • Attia Salim, ING
  • Ayah Al-Hneiti, The Housing Bank for Trade and Finance
  • Brandon Wells, Goldman Sachs
  • Cyril Finan, Deutsche Bank
  • David Willacy, StoneX Group
  • Dejna Zunic, Royal Bank of Canada (RBC)
  • Devon Falvey, Citibank
  • Elmi Gabobe, CAC International Bank
  • Farid Al-Masri, Arab Bank
  • Farid Samadov, Kapital Bank
  • Himath Kithsiri, Abu Dhabi Commercial Bank
  • Jon Boran, Lloyds Bank
  • Katherine (Katie) Belchere, PNC Bank
  • Khaled Berto, African Export-Import Bank (Afreximbank)
  • Kishore Kotian, Barclays Bank
  • Leos Hruz, BBVA
  • Marie Mohmand, Swedbank
  • Martin Cortazar Mueller, UBS
  • Min Jeong Chae, BMO (Bank of Montreal)
  • Mohit Mehtaji, HSBC Bank
  • Nadine Ghandour, BNP Paribas
  • Raphaël Scemama, Societe Generale
  • Ricardo Pacheco, City National Bank
  • Romain d’Apolito, UniCredit
  • Roselyn Najjuma, Standard Chartered Bank
  • Tomas Zaleckas, SEB
  • Tuomas Autero, Nordea
  • Valentina Polimeno, Intesa Sanpaolo
  • Viktoria Rudoj, Commerzbank 
  • William Murray, Fulton Bank

About BAFT

BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
Director, Public Relations
[email protected]
+1 (202) 663-5468

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