Rethinking Receivables Risk: What Recent Frauds Reveal About Market Infrastructure

Written by: Ian Milne, Executive Director Sales, MonetaGo

As the factoring industry gathers for this year’s IFA Annual Convention, recent high-profile receivables frauds have prompted renewed discussions across the market about how receivables risk is monitored and managed across multiple lenders.

Cases such as First Brands and Tricolor in the United States, together with earlier events including TransCare and Greensill internationally, have generated considerable debate across the lending and factoring community. These discussions often focus on underwriting standards, borrower conduct, or monitoring practices. While these factors are clearly relevant, they do not fully explain the persistence and scale of recent fraud events.

These developments also raise a broader question about the infrastructure that underpins receivables finance and how that infrastructure has evolved alongside the market itself.

For independent factors in the United States and Canada, this issue carries particular importance. Factoring remains a critical source of liquidity for SMEs, yet many firms operate with lean teams and concentrated client exposures.

For many firms, a single event can therefore be material.

When a receivables fraud occurs, the financial impact can therefore be significant relative to the size of the portfolio.

As borrowers gain access to multiple sources of financing, visibility across those relationships becomes increasingly important to effective risk management.

The receivables finance market has also evolved significantly over the past decade.  Private credit funds, specialty lenders, and fintech platforms now participate alongside traditional banks and factoring companies. For borrowers, this broader range of financing options can improve access to liquidity. For lenders, however, it can increase the complexity of monitoring receivables exposures across multiple financing arrangements. Documentation moves quickly, invoices are generated electronically, and transactions may be funded across several institutions simultaneously. In such an environment, gaps in transaction-level visibility can become more significant.

The UCC as Essential Legal Infrastructure

The Uniform Commercial Code remains the cornerstone of secured lending in the United States. It provides a clear legal framework governing the creation, perfection, and priority of security interests, and it has supported the development of modern asset-based lending and receivables finance for decades. The framework has proven highly effective in establishing legal certainty for lenders.

A UCC filing establishes public notice of a security interest and determines priority among competing creditors. What it does not do is identify individual invoices, verify receivables in real time, or determine whether the same receivable has already been pledged to multiple lenders.

In practical terms, the UCC protects lenders’ legal position if a borrower defaults. It was never intended to track the movement of receivables between financing parties before funding takes place. As borrowers increasingly combine asset-based lending facilities, factoring arrangements, and private credit funding, this distinction becomes more relevant.

It is also useful to consider the historical context in which the UCC framework developed. Article 9 was designed at a time when receivables financing typically occurred between a smaller number of lenders and borrowers, and when documentation circulated at a much slower pace. The objective was to provide clarity regarding creditor rights and priority, enabling lenders to extend credit with confidence.

That objective has largely been achieved. What the framework did not attempt to address was the monitoring of individual receivables transactions across multiple lenders in real time. As financing markets have grown more interconnected and digitally enabled, that operational dimension has become increasingly relevant.

Patterns in Recent Fraud Cases

Although individual fraud cases differ in structure and scale, several characteristics appear repeatedly.

Receivables financing frequently takes place across multiple lenders and platforms. Transactions move quickly, documentation circulates electronically, and lenders often rely heavily on information provided directly by the borrower when verifying receivables.

In many cases where duplicate financing later emerges, the legal framework governing security interests has operated exactly as intended. Filings may be properly completed, and documentation may appear entirely in order. The challenge arises earlier in the process, where transaction-level visibility across lenders can be limited before financing occurs.

One way to understand this dynamic is to distinguish between legal risk and operational risk. Legal frameworks determine creditor priority after default. Operational visibility helps lenders identify risks before losses occur.

Operational risk arises earlier in the financing process. It concerns whether the receivable being financed actually exists, whether it has already been financed elsewhere, and whether the information relied upon by the lender accurately reflects the underlying transaction.

In many fraud situations, the legal structure functions as designed once the issue becomes visible. The challenge is that losses may already have occurred before those legal protections become relevant.

This dynamic is not unique to the United States. Similar challenges appear in jurisdictions around the world.

Collateral Registries: Strengths and Limitations

Over the past two decades many countries have modernised secured transactions frameworks and introduced centralised collateral registries. These reforms have improved transparency of security interests, clarified priority rules, reduced registration costs, and expanded access to credit.

Most collateral registries, however, record security interests at a general asset category level, such as present and future receivables. They do not typically require invoice-level identification or monitor the financing of individual receivables across lenders.

As a result, duplicate assignment of specific receivables can still occur even within well-developed secured transactions systems. This reflects the original design of these frameworks, which was to establish legal priority rather than to monitor the flow of individual transactions.

For lenders operating in dynamic receivables financing markets, the distinction between these two functions can become increasingly important.

Emerging Infrastructure Approaches

Some jurisdictions have introduced additional infrastructure layers designed to address these operational limitations.

India’s Trade Receivables Discounting System requires invoices to be uploaded to regulated digital platforms before financing occurs. These platforms incorporate buyer confirmation and restrict duplicate financing within the system. While this does not eliminate all risk, it demonstrates how invoice-level infrastructure can reduce duplication within a defined ecosystem.

Singapore has also introduced complementary infrastructure, combining digital trade documentation initiatives with registry-based mechanisms that support invoice traceability before financing.

These examples illustrate an important principle: improvements in financial infrastructure often emerge through collaboration between regulators, lenders, and market participants.

In both India and Singapore, invoice-level verification was introduced alongside broader initiatives supporting electronic invoicing, digital trade documentation, and modern secured lending frameworks.

Adoption also occurred gradually. Systems were initially deployed within defined ecosystems before expanding as market participants became familiar with their operational benefits. While these models may not be directly transferable to every jurisdiction, they demonstrate how transaction-level verification can operate alongside existing secured transactions law rather than replacing it.

Implications for Independent Factors

Independent factors also face operational realities that differ from larger financial institutions. Financing relationships are often closer and more relationship-driven, and lenders may rely heavily on borrower-provided reporting when assessing receivables performance.

As SMEs increasingly access multiple funding channels, overlapping collateral exposure can arise across lenders without immediate visibility. This is particularly relevant where borrowers combine factoring arrangements with asset-based lending facilities or private credit funding.

Traditional controls therefore remain essential. Strong contractual protections, debtor verification procedures, field audits, and proper perfection of security interests continue to play a central role in risk management. Yet legal priority alone cannot always prevent losses arising from duplicate financing or fabricated receivables.

In response, some lenders are beginning to explore additional tools designed to strengthen transaction-level visibility. Greater scrutiny of multi-lender exposures during onboarding, participation in shared verification utilities, and industry collaboration around infrastructure standards are all areas receiving increasing attention.

While these approaches are still developing in many markets, they reflect a broader recognition that fraud prevention may benefit from shared infrastructure alongside traditional bilateral controls.

Conclusion

Recent fraud cases highlight an important structural reality. Legal frameworks provide creditor certainty, but they were never designed to monitor receivables financing in real-time.

In an increasingly digital financing ecosystem, legal certainty and operational visibility serve different purposes. One establishes creditor rights after default; the other helps reduce exposure before losses occur — often long before a legal framework would ever need to be invoked.

For independent factors supporting SME finance, strengthening transactional visibility may therefore become an important complement to traditional legal protections. As financing markets continue to evolve, continued discussion around infrastructure, collaboration, and transaction-level transparency may help reduce systemic vulnerabilities.

The opportunity for the industry is not simply to analyse the most recent fraud event, but to consider how the structures supporting receivables finance might continue to evolve so that future risks can be identified earlier and managed more effectively.

As financing markets evolve, the supporting infrastructure will inevitably need to evolve with them.

About the Author:

Ian Milne is a seasoned senior executive in commodity and structured trade finance who brings more than three decades of international banking experience across four leading global institutions. Known for a pragmatic commercial mindset and strong leadership, he combines deep functional expertise with a track record of building high-performing teams and resilient operational frameworks.

Over the course of a 32-year career, Ian has developed a comprehensive, front-to-back understanding of financial markets—shaped by early front-line achievements and complemented by senior leadership roles across global support functions. At Rabobank’s Singapore branch, he led the Trade Operations team for the CSTF portfolio, delivering a robust operational infrastructure and establishing procedures to ensure post-sanction conformance across all facilities. His remit also included oversight of regulatory compliance, including AML/ATF standards, and the implementation of effective operational risk controls.

Ian has held a number of senior international appointments, including Head of the Commodity Support Group at Fortis, with roles spanning London, Amsterdam, New York, Hong Kong, and Singapore. He later served as Global Head of the Collateral Management Team at Standard Chartered Bank and Global Head of the Transaction Management Unit at HSBC, both based in Singapore. Most recently, he was Director of Special Situations at TransAsia Pte Capital Ltd.

Throughout his career, Ian has demonstrated a consistent ability to develop and execute the full spectrum of CSTF transactions, establishing best-practice policies, processes, and systems while effectively managing operational and credit risk.

The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.