Pravni odnosi u dokumentarnom akreditivnom poslu

Fraud in letter of credit transactions: The experience of Malaysian bankers

The term letter of credit (LC) is not uncommon in international trade as it is the most frequently used method of payment by seller and buyer in their sales contract. LC serves its significant role by facilitating payment between buyer and seller from different countries, who are always prejudiced towards each other on the issue of payment, especially when the deal involves a huge amount of money. By using LC, the seller and buyer will be represented by their own bankers whose function, among others is to issue an LC for the buyer and pay on presentation of seller’s documents which strictly comply to LC requirements. It is well-known that LC is governed by the principle of autonomy or also referred to as the principle of independence1 which indicates LC, being a contract of payment is totally separate from the underlying sales contract. Banks are concerned with documents only and not with the goods. LC transaction can be governed by the Uniform Custom and Practice for Documentary Credit, known as the UCP through express incorporation which provides the rules relating to LC matters and is adopted in almost all LC transactions. This paper discusses the nature, background and significance of principle of autonomy in LC transaction. In elaborating the provisions on the principle of autonomy in the UCP 600, comparisons between relevant articles in the UCP 500 are highlighted. The discussion also focuses on relevant case law and on the application of the autonomy principle in conventional and Islamic LC. The paper concludes with the finding that Malaysian bankers fully subscribe to the principle of autonomy as outlined by the UCP 600.

Letter of Credit (LC) transactions play a vital role in facilitating international trade, but are vulnerable to various forms of fraud such as forgery of documents and manipulation of information. In the banking context, ensuring the security of LC transactions is an urgent challenge. This research aims to investigate the potential of applying blockchain technology in improving the security of LC transactions and reducing the risk of fraud in the banking sector. This research is included in descriptive quantitative research. This research was conducted at Banks in DKI Jakarta. The population in this research are customers who use Letter of Credit transactions. The sampling technique in this research is purposive sampling so that in this research the research sample was 100 customers who used letter of credit transactions. The data analysis technique in this research uses Partial Least Square (PLS). The research results show that blockchain technology has great potential to increase the security of LC transactions through aspects such as high data security, transparency and auditability, as well as automation through smart contracts. With proper implementation, blockchain technology can help reduce the risk of fraud, increase operational efficiency, and build trust in international trade. This study contributes to the understanding of the potential application of blockchain technology in the global financial context and highlights the importance of cross-sector collaboration to address transaction security challenges.

This article attempts to analyse the issue of fraud in letters of credit (LC) transactions, also known as documentary credits. There are numerous reported cases of fraud in LC transactions, which remain a continuing risk. The UCP 600 is a popular standard of practice for banks, which confirms that banks must honour payment to the seller upon full compliance with the documentary credit requirements. Such payments have been made despite being presented with falsified documents or substandard goods being delivered. It might not be realistic to expect that the International Chamber of Commerce (ICC) can create global standards relating documentary credits, which cover the practicalities of the existing system and relevant legalities applicable to the letter of credit system in international trading. Each party involved may have a responsibility to take some preventive measures to mitigate the risk of fraud. The doctrinal method is used to conduct this study because it involves an in-depth analysis of the gap within the Malaysian system and the strategies that maybe be adopted to overcome the risks associated with LC fraud. Findings reveal that LC documents can be easily falsified, and the occurrence of LC fraud is not uncommon in Malaysia. However, given the lack of literature it has not been highlighted in the past couple of years. The primary focus of this article is to suggest preventive measures that the respective parties could take to protect themselves from fraudulent dealings involving LCs.

This article attempts to analyse the issue of fraud in letters of credit (LC) transactions, also known as documentary credits. There are numerous reported cases of fraud in LC transactions, which remain a continuing risk. The UCP 600 is a popular standard of practice for banks, which confirms that banks must honour payment to the seller upon full compliance with the documentary credit requirements. Such payments have been made despite being presented with falsified documents or substandard goods being delivered. It might not be realistic to expect that the International Chamber of Commerce (ICC) can create global standards relating documentary credits, which cover the practicalities of the existing system and relevant legalities applicable to the letter of credit system in international trading. Each party involved may have a responsibility to take some preventive measures to mitigate the risk of fraud. The doctrinal method is used to conduct this study because it involves an in-depth analysis of the gap within the Malaysian system and the strategies that maybe be adopted to overcome the risks associated with LC fraud. Findings reveal that LC documents can be easily falsified, and the occurrence of LC fraud is not uncommon in Malaysia. However, given the lack of literature it has not been highlighted in the past couple of years. The primary focus of this article is to suggest preventive measures that the respective parties could take to protect themselves from fraudulent dealings involving LCs.

Despite the fact that documentary letters of credit (LC) are meant to facilitate the process of international trade, their specific characteristics may increase the risk of fraud while being used as the method of payment in the process of international transaction. Many factors like exclusive use of documents, geographical distance, absence of efficient prosecution, the diversity of legal system at the global level and restricted application of fraud rule can be considered as reasons for LC fraud. While billions of dollars are lost annually due to fraud in the course of LC operations, such vulnerability can result in reducing the global popularity of documentary letters of credit as the main method of payment used in international trade. Meanwhile, it is worth mentioning that fraud risk management is an unexplored territory in the practice of documentary letters of credit operation. Existing research tries to fill the gap in the study on comprehensive methods for mitigating fraud risk in operations with documentary letters of credit by using risk management theory in order to answer the question of how to manage fraud risk in LC transactions? In a quest to answer the research question, the paper is divided into two parts: the first part is dedicated to preventive measures while the latter explores responsive measures of an enterprise to manage fraud risk in LC transactions.

Letter of credit (LC) is one of term of payments on export import transaction. The purpose of this study is to analyze the impact ofmacroeconomic variables changes i.e exchange rate, inflation and the Bank Indonesia (BI) rateto value of LC, with study case in one of Bank in Indonesia.This study also analyze the differences in impact of the commodity on export import by using LC between agricultural and non-agricultural products. The data is analyzed by using Error Correction Model (ECM) to investigate the long run and short run relationship between macroeconomic variables and value of LC over the period of 2013–2016. The result show that the long run relationship between macroeconomic variables changes and value of LC is significant. Over all, the result show that allof the macroeconomic in this study was significantly influence the value of LC export, whereas the value of LC import was not influence by inflation variable. Differences of the commodity on export import by using LC also showing the different impact to the value of LC especially for inflation variable. The value of LC export and import of agricultural products was not influence by inflation variable. The recommendation for the bank to optimize the LC transaction is when domestic currency have depreciation, then the bank can increasethe LC transaction on export side either on agricultural or non-agricultural products. And then for BI rate factor, the bank should be wary of increase of the BI Rate because it can be impact to decrease the LC transaction.

Letter of credit (L/C) has a massive role in expanding international trade operations. It is considered the most secure and stable banking service to finance foreign trade operations such as import and export. As an international contract, potential legal issues arise due to fraud practices. In this case, L/C users have to be aware of different approaches followed by domestic courts while dealing with fraud at the international level. This paper aims to identify the fraud means under the fraud rule governing L/C and its impact on Jordan's practice. By applying a qualitative and doctrinal legal approach, this paper analyses the lack of organization of the uniform customs and practice for the letter of credit (UCP No. 600). It also examines, via interviews with Jordanian judges, the perceptions of the Jordanian courts' policy regarding the fraud rule exception in L/C. The finding reveals that to protect the interests of all parties in a letter of credit transaction, Jordanian courts should extend the scope of fraud to cover sale contracts fraud in cases where bona fide holder is involved and when a confirming bank is absent, or when the credit amount has not been paid yet by the issuing bank. In respect of the bank practices, such special provisions implemented to commercial code must be issued due to the lack of legal provisions of the L/C in Jordan legislation.

INCOTERMS 2020 FCA 규칙에서 선적전 발행된 선적선하증권에 관한 법적연구 - 신용장 당사자의 위험과 법률관계 중심으로 -

Non-Documentary Sales Replacing Letters of Credit: Effects of Information Technology, Supply Chain, and Export Credit Insurance

This article: First, (a) re-examines the fraud exception rule in letters of credit transactions with specific reference to the United City Merchants v Royal Bank of Canada (the American Accord) and against the background of a recent commonwealth decision accepting nullity as a new exception; (b) evaluates its impact on over/under invoicing under the WTO Agreement on Pre-shipment Inspection of Goods in International Trade (PSI); and (c) assesses its implication on the IMF Agreement on Exchange Control implemented in the UK by the IMF Agreement Regulations 1946 made under the IMF Agreement Acts 1945 as amended. Secondly, it argues that the current UCP 500 is outmoded and inadequate to meet current needs and is therefore in need of urgent revision. Thirdly, it recommends, inter alia, that in accordance with the said commonwealth decision, fraud by third parties should be recognised by English law as an independent and separate nullity exception. Fourth, and finally, it concludes that the status-quo acts as an unwitting Crooks’ Charter for money launderers, documentary fraudsters and other white collar crimes.

1. Importance of shipping documents which should accord with the terms of the letter of credit for the collection of payment through negotiation with the concerned banks and treatment of the shipping documents which are not in accordance with the terms of the letter of credit; 2. Function of the bill of lading and air way bill in negotiating with the bank; 3. Contractual function of commercial invoices in letter of credit transactions; 4. Nature of the bill of exchange from the viewpoint of facilitation of international trade; 5. Proceedings of transactions through bills of exchange under the documentary letter of credit; 6. Treatment of documents delivered contrary to instructions under the terms of letter of credit; 7. Characteristics of the letter of credit from the viewpoints of the exporter and importer.

This study aims to understand and examine the legal consequences of unlawful acts against banks involved in L/C transactions. This study uses a normative legal research method. The collected legal material is then qualitatively analyzed to describe the problem and answer the study objectives. The results show that Board Member Regulation Number 23/21/PADG/2021 demonstrates Indonesia’s legal adaptation to UCP 600 as the international standard in L/C transactions. UCP 600 emphasizes the principle of independence about the Bank’s role, which is limited to verifying L/C transaction documents. However, there is a risk of L/C Fraud, where the Issuing Bank has the right not to pay the Exporter if there are indications of fraud, by implementing the “Fraud Rule.” The approach to L/C Fraud varies across jurisdictions; in countries with civil law systems, such actions are often considered unlawful acts, while in countries like the United States, they are viewed as criminal acts. Therefore, it is recommended that relevant stakeholders enhance their understanding and compliance with UCP 600. Issuing Banks and Advising Banks need to develop more effective mechanisms for detecting and preventing L/C Fraud, considering the different legal approaches to L/C Fraud in various jurisdictions. Training staff on the nuances of L/C Fraud and how to identify it is also essential. Furthermore, resolving L/C disputes through civil law channels is considered more appropriate, given these transactions’ commercial and contractual nature. Stakeholders should collaborate to strengthen the legal framework and procedures that support the integrity and security of L/C transactions and to align practices with international standards to enhance trust and security in international trade.

Foreign economic activities in general, foreign trading and international payment activities in particular, are regulated by a complex system of legal documents, including both the national and international legal system. To avoid disputes and risks arising in letter of credit (LC) transactions, the involved parties must thoroughly understand the legal substance of all the relevant regulating documents, in which the most important one is the international trading rules and guidelines issued by the International Chamber of Commerce (ICC). As these ICC documents are not mandatory and do not include sanctions for handling disputes, this article will discuss deeply on the legal substance of these documents with a focus on issues relating to LC transactions, aiming to provide recommendations for involved parties.

This paper discusses protections available to different parties involved in a Letter of Credit transaction, and examines the concept of negotiation under a Letter of Credit.