Trade finance and private credit suffered a few shockwaves towards the end of 2025 (First Brands Group (FBG), Tricolor, and Cantor Group), and we’re still feeling the impact of those failures now, industry-wide.
Sounding prescient, Man Group stated “a stunning lack of diligence on the part of banks” has undermined confidence in private credit, trade finance, and other non-traditional financial vehicles.
In some cases, as bankruptcy and court documents show, compliance was so weak that double- or even triple-factored invoices were present in invoice factoring programs. Leverage upon leverage. Risk multiplied.
One way to protect against this is to implement more robust KYC protocols, known as Perpetual KYC (pKYC) and Know Your Agent (KYA).
Trade Finance KYC: Key Takeaways
- Periodic KYC is no longer fit for purpose. Periodic, calendar-based reviews cannot keep pace with the rapid evolution of counterparty risk. There have been too many high-profile compliance and KYC failures to justify the risk of continuing to use tech that isn’t fit for purpose.
- Perpetual KYC (pKYC) is the way ahead. A continuous, event-driven approach — tightly integrating onboarding, sanctions screening, transaction monitoring, and case management — gives banks, asset managers, and corporate treasuries a real-time picture of counterparty risk and a defensible audit trail.
- Know Your Agent (KYA) is an emerging priority. Beyond knowing your customer, trade finance firms increasingly need visibility into the agents and intermediaries operating within their programs, particularly in complex, multi-party structures.
- AI and ML are making pKYC easier to implement. From predictive risk scoring and fraud detection to automated document processing and portfolio analytics, AI-powered tools can significantly reduce the cost and manual burden of KYC. This is important given that large trade finance banks can spend up to $42m annually on compliance tasks alone.
- Platform choice matters. Not all KYC platforms are built for trade finance. Firms should prioritize solutions with strong KYB capabilities, CLM functionality, and multi-jurisdictional coverage — rather than tools optimized for high-volume retail identity verification.
Let’s take a closer look at this and how banks, asset managers, and corporate treasuries running trade finance programs can make their compliance more robust.
How KYC is evolving in 2026: Perpetual KYC (pKYC) and Know Your Agent (KYA) protocols
Trade finance has always carried a distinctive risk profile. Cross-border transactions, complex corporate structures, multiple counterparties, and goods that can obscure the true nature of a deal.
However, as we’ve seen with recent private credit failures, too many firms still rely on periodic KYC reviews that may only detect changes in risk months or years after they occur. That gap is becoming harder to justify.
Customer risk in trade finance moves quickly:
- A buyer or seller may expand into a sanctioned or high-risk country.
- An underlying beneficial owner may change following a corporate restructuring.
- A customer’s product usage may shift—from straightforward letters of credit (LoC) and invoice factoring to more complex instruments that warrant closer scrutiny.
If the KYC record does not reflect those changes, transaction monitoring alerts are assessed against outdated information, and any resulting decisions could become higher-risk without a bank or asset management counterparty realizing it.
Your exposure could increase without anyone being aware, as we’ve seen with prominent private credit failures.
This is why there is a shift toward perpetual KYC — a model in which customer profiles are continuously updated based on triggering events rather than a fixed calendar.
For trade finance programs, this means tighter integration between onboarding, sanctions screening, transaction monitoring, and case management, with a clear audit trail showing what changed and how the firm responded.
Trade finance programs in banks, asset managers, and SaaS that invest in pKYC or KYA (Know Your Agent) technology enabling live, event-driven risk management across the finance lifecycle will be better placed to meet those expectations.
LiquidX developing even more robust anomaly detection to support KYC workflows
pKYC or KYA and will also help reduce the friction caused by repetitive information requests, thereby speeding up deal execution.
We are currently developing our own solution, with the aim of improving fraud prevention within our Digi solution. More information on that coming soon!
4 ways AI/ML in KYC can help trade finance become more transparent, robust, and secure
In the current challenging economic climate, robust KYC, AML, and fraud prevention is more important now than ever.
AI/ML-based systems can help banks and asset managers improve their KYC posture and performance in a number of ways:
1. Reduce KYC risks with AI-powered pKYC
Use AI-powered risk management analysis to predict counterparty risk, detect fraud, and implement perpetual KYC that’s faster and more effective than traditional approaches.
KYC and risk management, and compliance can be an expensive ⏤ but regulatory and operationally crucial ⏤ part of trade finance.
An EY article notes that: “On average, a large trade finance bank can spend anywhere from $25m to $42m annually on risk, compliance, sanctions and anti-money laundering (AML) tasks – all without growing its business.”
AI and digital tools with automation embedded into them can dramatically reduce the need for manual work, and the cost of risk management in trade finance.
2. Use AI for fraud detection and prevention
According to EY, “An estimated $1 trillion of financial crime proceeds flow through the $9.1 trillion industry’s trade channels each year.”
As a result, KYC and AML are an essential part of any trade finance transaction.
As part of risk management, when you automate and use AI for the usual fraud detection checks and safeguards, it makes this process easier, more efficient, faster, and less prone to human error.
3. Predictive analytics and forecasting
Banks and asset managers need a way to forecast demand, assess who’d be a good buyer for trade finance assets at spread, and reduce counterparty risk and being overexposed to any one organization, sector, or transaction type.
For example, if you are holding $500M in a $1bn portfolio of short-term consumer goods transactions, it might be worth diversifying your portfolio.
It should also be easier to see which parties you’ve sold or bought from, preventing accidentally selling any financial tranches twice.
AI analysis can help make this easier, with automated alerts and rebalancing trigger points.
4. Digital document processing, any format ingestion
On the supply side, trade finance transactions involve processing invoices, certificates of origin, and customs documents.
AI-driven optical character recognition (OCR) and natural language processing (NLP) accelerate document review and extraction, dramatically reducing turnaround times.
All of this makes digitization, which is the first stage in any trade finance transaction, including monetization.
Financial Institutions (FIs): Sign-up to LiquidX’s White-Label Program
LiquidX’s White Label Partner Program enables FIs (including neo and challenger banks) to launch full-turnkey, AI-enabled trade finance capabilities under their own brand without years of in-house software development.
As we’ve found from our analysis of $90 billion in transactions since 2021, white-label is the highest-growth segment, up 1,426%, as banks and FinTechs outsource specialized trade finance functions.
Joining LiquidX’s innovative Partner Program (LPP) is far more cost and time-effective than building trade finance software in-house. That can take years and require significant investments.
Partnered with Broadridge (NYSE: BR), LiquidX provides the only complete front-to-back office trade finance solution.
Our award-winning white-label software helps banks and asset managers like US Bank, NORD/LB, Crédit Agricole Group (CACIB), Truist, and many others scale quickly, reduce costs, and handle every aspect of trade finance more effectively.
A recent case study demonstrates this power: an alternative credit manager with approximately $3 billion in AuM achieved a fully operational, Manager-branded platform within just 10 weeks.
Engaging in a white-label partnership with LiquidX enables FIs to avoid the costs of hiring new staff. This means you can focus on your core competencies, services, and growth-centric work.
You can run an entire end-to-end trade finance program through our software. No need to increase headcount either, just let our software take care of everything under your brand.
Find out more, and contact us for a demo of our white-label partner program.