Risk & Fraud In International Trade, Through Letter Of Credit, Standby Letter Of Credit And Demand Guarantee

Risk & Fraud In International Trade, Through:

Letter Of Credit, Standby Letter Of Credit And Demand Guarantee

INTRODUCTION

Businesses in international trade face a growing threat from crime. Currently the main threat to international traders is fraud from organized crime, including theft of your goods or your business identity, cross-border crime and road-freight crime. Other risks include infringement of intellectual property or employee fraud.

The rise in online trading has created new forms of criminal activity, such as new ways of laundering money. This action-based guide explains the key risks involved, how to reduce them, and what to do if your business is targeted.

Understand common types of fraud in international trade

Fraudsters may try to steal your goods, business identity or tap into your business to launder money. Criminals may approach you through letters, a phone call, or via email. Increasingly, cyber-crime is a principal priority risk. Typical scams include investment offers or opportunities to acquire new customers who you supply but never receive payment from.

‘Phishing’, or rogue emails asking for your business banking details, are a common way to steal money.

What is Letter of Credit Fraud?

A letter of credit fraud is a type of scam in which the scammer attempts to make money via faulty business transactions or tells victims that a letter of credit is an investment. A letter of credit is a legitimate document that details how one party will pay another for a business transaction. One way scammers perpetrate letter of credit scams is by promising to ship items to a party in exchange for payment, only to disappear after receiving the money. Another way is for the scammer to tell the victim that a letter of credit is an investment, though this type of investment does not exist. It is difficult for banks to stop this fraud entirely, so potential victims have to know the telltale signs of the scam.

Letters of credit are common documents issued from one party to another, detailing payment terms. They specify how one party will pay another, how much they are paying, and for what they are paying. The document is taken to a bank, and the second party is paid the value of the letter. These documents are typically used for international purchases, but domestic purchases also may use this letter. With letter of credit fraud, the scammer gets the victim to sign the document before producing any goods or services.

WHO SHOULD ATTEND?

• Finance Managers
• Export-Import Managers
• Shipping& Logistics Managers
• In-house counsels
• Insurance companies
• Lawyers engaged in trade finance & commercial laws

COURSE OUTLINE

Types of commercial and international trade fraud

Relationship between buyer, seller, banks and other trade service providers in documentary credit operations

• Documentary letter of credit fraud:
  – Fraudulent Drawing on L/C
  – Forget or false documents
  – Collusion
  – Strategies
• Commodity fraud
  – Schemes evolved
  – Characteristics of the Frauds
  – Identifying the fraudulent transactions

Financial instruments fraud

• SBLC and BG frauds
• Bill of exchange and promissory note frauds

Characteristic of fraud

• Red flags

Money laundering and terrorists financing

Synthetic LC or structured trade finance

Prime bank instrument frauds

• High yield financial instrument frauds
• Promissory notes and bills of exchange
• Standby LCs

Prevention and mitigation