Trade finance has long been synonymous with labor-intensive, paper-driven processes, entangled in geographic, political, and compliance complexities. Despite efforts to digitize, the sector remains constrained by the persistent need for physical documents. An ICC survey revealed that documents like Bills of Exchange, Promissory Notes, Bills of Lading, and Certificates of Origin still need to be maintained in physical formats due to governmental mandates in various jurisdictions. However, recent frameworks such as the Model Law on Electronic Transferable Records (MLETR) and the Uniform Rules for Digital Trade (URDTT) have pushed the industry toward fully digital trade processes, eliminating paper trails at their source.
The Current Digitalization Landscape
The shift toward end-to-end digitalization—where documents originate in digital form—remains an ongoing journey. Traditional Optical Character Recognition (OCR) systems, often used for over a decade, have laid the groundwork for digitization by converting physical documents into searchable, editable formats. However, traditional OCR systems, primarily reliant on structured document layouts, struggle to handle the complexities of diverse and unpredictable trade documents. As a result, banks and financial institutions face scalability challenges, often requiring extensive training or large resource pools to maintain these systems.
Enter Intelligent Document Processing (IDP)
To address these challenges, Intelligent Document Processing (IDP) builds upon OCR's foundation with advanced technologies like Artificial Intelligence (AI), Machine Learning (ML), and Natural Language Processing (NLP). This innovation offers robust solutions for extracting data from complex, unstructured, and multi-format trade documents while improving accuracy and operational efficiency. Key features of IDP include:
- AI-Powered OCR Enhancements: Accurate extraction of goods data from tabular forms and multi-language or handwritten text, areas where traditional OCR struggles.
- Context-Aware Data Processing: The ability to process structured and unstructured data while applying contextual understanding.
- Seamless Integration: Open architecture with APIs, enabling traceability and streamlined integration into existing systems.
- Automatic Document Classification: Achieving over 98% accuracy, reducing manual effort.
- Continuous Learning: Feedback loops enhance system performance over time, adapting to diverse document variations.
Pelican AI: Transforming Trade Finance and Compliance
With over 25 years of expertise in Artificial Intelligence for financial services, Pelican AI stands at the forefront of innovation in the trade finance ecosystem. Through its flagship solution, Pelican Secure Trade, the company harnesses the power of IDP alongside other AI disciplines—NLP, Knowledge-Based Systems, and ML—to automate and streamline the processing of trade documents while tackling the complexities of trade compliance.
Addressing Compliance Challenges in Trade Finance
Compliance in trade finance has become increasingly intricate, as institutions face growing scrutiny over Trade-Based Money Laundering (TBML), Trade-Based Terrorist Financing (TBTF), and trade fraud. These challenges, combined with a surge in global regulatory requirements, demand innovative, automated solutions to manage compliance risks effectively.
Specific Trade Compliance Typologies Supported by IDP
Pelican Secure Trade, powered by IDP, offers advanced capabilities to address the following compliance typologies in trade finance:
- Trade-Based Money Laundering (TBML):
- Identifies anomalies in trade documents, such as over- or under-invoicing, phantom shipments, or misrepresentation of goods.
- Detects patterns of circular trading, often used to launder money.
- Validates document authenticity to prevent fraudulent transactions.
- Trade-Based Terrorist Financing (TBTF):
- Monitors for unusual trade activity with high-risk geographies or sanctioned entities.
- Flags discrepancies in trade routes or counterparty details that could indicate illicit activities.
- Dual-Use Goods Identification:
- Identifies goods classified as dual-use (civilian and military purposes) by analyzing product descriptions and cross-referencing with regulatory databases.
- Customs Evasion and Misclassification:
- Flags discrepancies in Harmonized System (HS) codes and mismatches between product descriptions and declared values.
- Detects attempts to evade duties or taxes by misclassifying goods.
- Sanctions Compliance:
- Screens all trade parties and shipping routes against global sanctions lists (e.g., OFAC, UN, EU).
- Ensures alignment with regulatory mandates for avoiding transactions involving embargoed regions.
- Counterfeit Goods and Fraud Detection:
- Validates supplier authenticity and ensures consistency in trade document chains to detect counterfeit goods.
- Identifies forged trade documents, such as altered Bills of Lading or fraudulent Letters of Credit.
- Illegal Trade Practices:
- Flags trade anomalies that suggest trafficking in prohibited goods (e.g., wildlife trafficking, human trafficking).
- Monitors for misdeclared or prohibited items being shipped across borders.
Pelican Secure Trade’s Compliance Capabilities
- Automated Compliance Verification:
Pelican Secure Trade automates compliance checks across trade documents by integrating advanced AI tools. These tools scan, analyze, and validate documents against global regulatory frameworks, including anti-money laundering (AML) and counter-terrorist financing (CTF) requirements, minimizing the risk of errors or oversight.
- Risk-Based Prioritization:
Risk-based workflows allow institutions to prioritize high-risk transactions, focusing compliance resources where they are most needed
- Enhanced Regulatory Reporting:
With built-in compliance workflows, the solution generates accurate, real-time reports that meet global regulatory requirements. This streamlines reporting processes and ensures institutions remain audit-ready.
- End-to-End Traceability:
Provides full visibility into trade transactions, ensuring every compliance-related action is traceable. This transparency strengthens institutions' defenses against regulatory breaches and reputational risks.
Empowering Compliance Through Intelligent Automation
By addressing specific trade compliance typologies and integrating these features into its Secure Trade solution, Pelican AI enables financial institutions to achieve a robust compliance posture. The solution not only reduces operational burdens but also transforms compliance into a strategic advantage. As trade regulations evolve, Pelican AI’s solutions ensure institutions remain ahead of the curve—enhancing efficiency, mitigating risks, and securing global trade processes for the future.