Commodity-finance risks back in focus amid Radiant World scrutiny
Singapore has strengthened digital checks, but gaps remain in verifying if underlying trades are genuine
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[SINGAPORE] After the 2020 collapse of commodity traders such as Hin Leong and Zenrock left banks facing billions of dollars in exposure, Singapore strengthened its trade-finance safeguards, including new checks aimed at detecting duplicate financing.
Recent scrutiny surrounding iron ore trader Radiant World has put commodity-finance risks back in focus, while industry watchers point to broader vulnerabilities that digital safeguards cannot fully address.
Several counterparties and lenders have stopped doing business with Radiant World amid concerns over the validity of invoices provided to banks.
The Singapore police said in August that they were investigating the company after receiving reports, but Radiant World has denied wrongdoing.
Separately, lawyers and industry watchers who spoke to The Business Times about commodity-finance risks said that while digital tools have made it easier to spot duplicate financing, a bigger problem remains: determining whether the underlying trade is real in the first place.
Baldev Bhinder, managing director at Blackstone & Gold, a disputes law firm specialising in commodities and trade, noted that it is “notoriously difficult” to detect a fake invoice.
“The invoice is just a piece of paper; the real question is what the transaction that generated the invoice is,” he added. For example, purported trades can be generated solely to obtain financing because invoices can be financed by discounting the invoices.
Rather than asking whether an invoice is genuine, Bhinder said that the key question is whether there has been a genuine trade.
“The way to get confidence on whether there is a genuine trade is through independent verification, physical or documentary control, data transparency and what is often overlooked, an understanding of the commercial reality of the trade,” he added.
Ben Charoenwong, associate professor of finance at Insead, noted that the 2020 commodity-trading scandals exposed “two distinct issues” in the commodity financing space: duplication and fabrication.
The Zenrock case involved allegations of multiple financing, while Hin Leong forged documents for oil sales to China Aviation Oil and Unipec that never took place.
Chenthil Kumarasingam, dispute resolution partner at Withers KhattarWong, said that the most common frauds continue to involve duplicate financing, fictitious or inflated invoices, round-tripping and misrepresentations regarding the existence, ownership or value of cargo.
“While lenders have better tools today, commodity finance often involves multiple counterparties and jurisdictions, creating opportunities for bad actors to exploit information gaps,” he added.
Stronger checks, but blind spots remain
To combat duplicate financing, the Association of Banks in Singapore launched the Trade Finance Registry’s Duplicate Financing Check in 2023. It is backed by 40 participant banks and had processed more than 18,000 queries by February 2025.
In 2025, the registry expanded to include a Bill of Lading Genuineness Check, which routes verification requests through SGTraDex to carrier data aggregators and ocean carriers.
The tool is slated for adoption by roughly 70 per cent of participant banks, replacing the reliance on e-mails and phone calls to shipping lines to verify documents.
Market watchers noted that these platforms are effective in addressing the specific problems that they target.
“The thing to highlight here is that in the world of fast financialisation, as we’re seeing with tokenisation, the trust in the system is only ever as good as the custodian who helps to verify and enforce that declared items are actually there,” said Prof Charoenwong.
The remaining gap, he said, lies in receivables and invoice financing, because there is no physical cargo movement or carrier record to verify a claim against. Lenders therefore rely solely on the borrower’s representation of what a counterparty owes.
Prof Charoenwong said that the allegations surrounding Radiant World could illustrate this type of verification problem.
“If the Radiant World allegations hold, the mechanism looks more like fabrication than duplication, applied to a financing structure (that) current registry infrastructure does not reach.”
Where digital checks stop
Beyond invoice financing, other structural hurdles remain in commodity finance.
Kumarasingam of Withers KhattarWong flagged the limitations of cryptographic hashing, which verifies transactional uniqueness rather than underlying substantive truth.
He added that there is a lack of cross-border interoperability among global trade registries, while the continued use of physical bills of lading and letters of indemnity can leave scope for parallel paper manipulation.
Against this backdrop, due diligence and independent verification are equally important, Kumarasingam said, because sophisticated fraud can still occur when documents that appear to be authentic or false information are introduced at source.
Blackstone & Gold’s Bhinder similarly said that no single platform or software can eradicate trade fraud because trade is international in nature.
“As long as one trader or lender operates outside these systems, the risks will resurface,” he added. “Having said that, you have to start from somewhere and these initiatives are a step in the right direction.”
Prof Charoenwong noted that the limitation of the existing digital tools lies in their scope rather than their execution.
While these digital tools verify information against an independent external record, such as another bank’s financing history or a carrier’s shipment data, neither covers transactions relying solely on counterparty records, such as an invoice claiming that a buyer owes money, he added.
He described this as a verification challenge that requires the buyer’s active cooperation each time.
Extending the model requires buyers to confirm or deny invoices at scale – a mechanism that Singapore’s trade finance infrastructure does not currently have, said Prof Charoenwong.
Such a system could put a burden on firms’ management systems as well as their enterprise resource planning and finance systems, he noted.
How can lenders protect themselves?
Beyond digital checks, Bhinder said that the key protection for lenders tends to be maintaining some control over the underlying commodity.
This can include holding the bills of lading, which gives lenders a right of possession over the goods, or collateral management arrangements, where a third party verifies the existence of the goods.
“The tricky part is not just to verify the existence of the goods, but that it is being held in your favour,” said Bhinder.
Such protections are common in properly structured bank commodity-finance transactions, he noted, but what varies considerably is the depth of the controls.
A large, structured borrowing-base facility secured against identified inventory is “very different” from a short-term invoice financing product where the lender may have little direct contact with the underlying trade, he explained.
Bhinder also warned against allowing preconceived notions or existing relationships to weaken such controls.
“The most fundamental issue is one of human biasness when it comes to longstanding relationships and big-name corporations, rather than legal documentation,” he explained.
“When relationships become more familiar, there may be a danger of moving away from trade finance, where the security of the goods is critical, to balance sheet financing where comfort is derived from the large asset position of the borrower.”
Kumarasingam said that lenders can impose strict conditions precedent for disbursement, including surveys or automated cross-checks, and require direct payment to vendors and direct collection from escrow accounts.
He noted, however, that some of these measures will increase the cost of doing business.
Meanwhile, Kumarasingam said that the next stage of reform should focus on improving data quality and information sharing across the trade finance ecosystem.
“Fraud risks are reduced when banks, traders, logistics providers and warehouse operators can verify information through trusted and connected sources,” he said.
“Preventing fraud ultimately requires a combination of reliable data, effective controls and commercial discipline rather than any single solution.”
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