UK trade registry would ‘boost SME finance, cut fraud’

London: The International Chamber of Commerce (ICC) UK has called for the government to establish a national registry of trade documents, which it says could reduce invoice fraud, boost access to SME trade finance and grow tax revenue.

The proposal forms part of a wider growth plan published by ICC UK last month, which sets out a series of recommendations aimed at “unlocking £25bn in trade growth”.

At the heart of the plan is a government-led digital trade registry, which – according to a more detailed outline seen by GTR – would be hosted by the International Centre for Digital Trade and Innovation (iC4DTI), a public-private initiative launched in November last year.

Under the proposal, companies would register trade documents such as invoices on a central platform, where they would be digitally verified.

This would allow financial institutions to confirm the authenticity of transactions and ensure invoices aren’t being financed more than once, reducing a key risk in the trade finance market.

“The beauty of a register is you just post up your invoice, and then anybody who’s got finance, which could be investors, equity, banks or non-banks, can see what you’ve got,” ICC UK secretary general Chris Southworth tells GTR. “Therefore your ability to access finance is enormously improved.”

The UK currently has some of the highest rates of circumstantial invoice fraud in Europe, according to a 2023 survey by fraud detection software provider Lenvi.

For instance, 35% of UK respondents reported encountering invoice re-aging – where a due date is altered after the fact, often to disguise late payments – and 37% have seen double funding of invoices.

These figures are higher than those in France, Spain or Germany.

A centralised trade register, combining invoices and collateral, could bring these fraud rates “effectively almost to zero”, says Oswald Kuyler, digital standards advisor at ICC UK.

In addition to strengthening financial security, the registry could also serve as a tool for improving VAT compliance. By incorporating tax reporting, the system would allow HM Revenue & Customs (HMRC) to monitor transactions in real-time – helping to reduce the UK’s estimated £8bn VAT gap.

The ICC UK estimates the cost of setting up such a registry would require an investment of £15-£20mn over three years. It proposes that seed funding comes from the UK’s Department of Business and Trade, supported by the Cabinet Office and HMRC, with additional funding from industry participants.

Invoice registries have been developed in a handful of jurisdictions, including Singapore, India and the UAE.

The ICC UK’s proposal argues that India’s registry has already increased tax revenue while reducing the risk of multiple financing fraud.

It says Singapore’s system, which was launched following a series of fraud scandals and has since expanded to bill of lading verification, has boosted economic growth.

In the UK, Kuyler says a registry could be designed as “something that helps the banks and also helps the government collect more revenue”.

Southworth suggests the registry should form part of the UK government’s ‘Plan for Change’ strategy, announced in January, which aims to go “further and faster” to boost the country’s economy.

The ICC UK is currently in talks with the government to garner its support, he says.

Southworth also believes that the UK’s financial regulators, the Financial Conduct Authority and the Prudential Regulation Authority, should be more involved in this process to encourage banks to support the proposal.

“The banks are not going to agree to set up market infrastructure without at least the green light from the regulators and the green light from government, but we don’t have those two things,” Southworth says.

Other ideas proposed by the ICC UK growth plan include establishing “digital trade superhighways” with other trade partners, including France, India and Singapore, ensuring processes and systems are digital and interoperable across all markets.

It also suggests regulatory changes so that trade finance is classified as a distinct, low-risk asset class, allowing it to benefit from preferential capital treatment.