Letter Of Credit Transaction Research Articles

Legal Issues between the Opening Bank and the Bonded Warehouse Operator in the Letter of Credit Transaction - Focused on the Supreme Court Decision 2022da208649 -

Legal Issues between the Opening Bank and the Bonded Warehouse Operator in the Letter of Credit Transaction - Focused on the Supreme Court Decision 2022da208649 -

Optimizing the Security of Letter of Credit Transactions: Application of Blockchain Technology in Reducing the Risk of Fraud in Banking

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.

Legal Consequences of Unlawful Acts against Banks in Letter of Credit Transactions

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.

A study on the shipped B/L issued before shipment of cargo in the INCOTERMS 2020 FCA Rules - Focusing on the risks and legal relationships of the parties in the letter of credit transactions -

A study on the shipped B/L issued before shipment of cargo in the INCOTERMS 2020 FCA Rules - Focusing on the risks and legal relationships of the parties in the letter of credit transactions -

PEMBAYARAN LETTER OF CREDIT MENGGUNAKAN INTERNET BANKING DALAM TRANSAKSI PERDAGANGAN INTERNASIONAL (STUDI PADA PT BANK PEMBANGUNAN DAERAH JAWA TIMUR, Tbk)

Today Letter of Credit (L / C) is not the only way of payment in import and export activities, but the role of Letterof Credit (L / C) is still important because this way of payment can provide a sense of security, both for the exporter,and for importers ... The formulation of the problem is How is the export-import arrangement by paying Letter ofCredit through internet banking at PT Bank Jatim Tbk? How is the legal protection for PT Bank Jatim Tbk as apayer in Letter of Credit transactions through internet banking. The conclusion is in accordance with the principleof pacta sunt servanda as regulated in Article 1338 paragraph (1) of the Civil Code which states: "all treaties madelegally apply as a law for those who make them" and the principle of good faith stipulated in Article 1338 paragraph(3 ) Civil Code. Internet banking is a real-time online payment service, organized by banks.

The Fraud Rules in the Letter of Credit under Jordanian Legal System

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.

PREVENTIVE MEASURES TO MITIGATE THE RISK OF FRAUD IN LETTERS OF CREDIT TRANSACTIONS IN MALAYSIA

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.

PREVENTIVE MEASURES TO MITIGATE THE RISK OF FRAUD IN LETTERS OF CREDIT TRANSACTIONS IN MALAYSIA

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.

An Assessment of Negotiation Practice under L/C Transactions: A Focus on Deferred, Acceptance and Negotiation L/Cs

Purpose - The purpose of this paper is to improve operations of the credit negotiation business by assessing the transactional practice of purchasing Bills of Exchange and/or documents before maturity under Letter of Credit transactions. Design/Methodology - The author first considers the types of usance L/C (e.g., negotiation L/C, deferred L/C, acceptance L/C) and examines the meaning of ‘negotiation’ defined in Article 2 and Article 12(b) of the UCP. Finally, this study takes a deep look into legal cases in which the act of negotiating has been an issue. Findings - First, in order to meet the requirement of ‘negotiation’ under UCP, four conditions must be satisfied. Second, banks are even allowed to purchase deferred payment undertaking (DPU) freely, as the UCP allows them to do so. Third, the beneficiary under acceptance L/C can freely recover payment in two ways - by discounting the Bill of Exchange accepted by that bank, and by selling the Bill of Exchange and/or documents. Lastly, there is a need to distinguish between the words ‘discounting’ and ‘negotiation’ used interchangeably in the field because these two mean different methods of recovering the payment. Originality/value - Despite the fact that the usage of Usance L/Cs has considerably increased in the export business of Korea, prior studies have focused only on issuing or confirming banks, or analyzing the articles of the UCP. Moreover, there has been no research on usance L/Cs nor on the practice of negotiating such L/Cs in the field.

The impact of technology on access to law and the concomitant repercussions: past, present, and the future (from the 1980s to present time)

Abstract That technology increasingly impacts everything that is linked to law—from access to law, legal education, the services provided by the legal industry, and, increasingly, even adjudication (in-court or via alternative dispute resolution)—is a fact. The role that technology plays in these contexts varies, yet one may safely presume that the influence will intensify. In order to reflect on the future, this article canvasses and tries to draw some conclusions based on the comparison of accessibility to foreign and local law in the hard copy versus the digital and Internet-based, as well as the recently unfolding era of algorithms. The examples range from the curious encounter of Central and Eastern European socialist enterprises and law students with punitive damages and strict tortious liability known in the USA through the most recent launching of the first transnational letter of credit transaction exploiting blockchain technology. The advancements generated by technology advancements in these three stages are then reflected upon primarily from the perspectives of (i) researchers and lecturers of law as well as legal education; (ii) company boards and managements (especially foreign market-oriented business firms) formulating their business policies; and (iii) regulators as well as law and policy-makers. The article concludes with thoughts on the broader implications of enhanced access to law. In particular, it posits that technology has made the shift from ‘mechanical’ to ‘analytic access to law’ possible. Yet it also raises the more fundamental question of whether the advancements denote, and the selected examples properly illustrate, that a more fundamental shift is unfolding: a shift from governance by law to governance by technology?

On the issue of "clean" bills of lading

The main document in the process of "documentary" sale of goods is traditionally a bill of lading – a universal multi-purpose document used exclusively for the carriage of goods by sea or inland waterways. As practice shows, for example, in letter of credit transactions, banks, which are an important link in the contract of sale of goods, have a negative attitude to the so-called "unclean" bills of lading containing certain clauses, preferring to receive a set of documents that include only "clean" bills of lading. The article primarily analyzes the clauses that can be made to the bill of lading and are unilateral statements of the carrier on certain issues of performance of the contract of carriage by sea and do not require agreement with the shipper.

Pengaruh Variabel Makroekonomi terhadap Penyaluran Transaksi Ekspor dan Impor dengan Metode Pembayaran Letter of Credit

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.

Bank’s Liability and Court’s Obligation to Non-Documentary Conditions in the Letter of Credit Transactions

Bank’s Liability and Court’s Obligation to Non-Documentary Conditions in the Letter of Credit Transactions

A Study on the Types and Countermeasures of Soft Clauses in Relation to Goods Inspection in Letter of Credit Transactions

A Study on the Types and Countermeasures of Soft Clauses in Relation to Goods Inspection in Letter of Credit Transactions

Managing money laundering risks in commercial letters of credit

Purpose The purpose of this paper is to critically examine the role of banks in detecting and mitigating money laundering risks in trade finance activities, especially in commercial letters of credit, and to answer the central question: do banks comply with regulations that are inadequate (if so, is more stringent regulation compatible with the commercial world of trade finance?), or are banks are in danger of non-compliance? Design/methodology/approach The relevant principles promulgated by international organisations as well as the law enacted in UK to prevent money laundering risks in commercial letters of credit was examined to assess banks’ compliance with their anti-money laundering (AML) obligations. The key provisions of the Money Laundering Regulations 2007, Proceeds of Crime Act 2002 and the Wolfsberg Trade Finance Principles were discussed, and the extent of banks’ compliance with these provisions was highlighted by carefully analysing the steps a bank might take at various stages of the operation of a commercial letter of credit and what the banks in fact do. The paper relies heavily on the findings of the recent study conducted by the Financial Conduct Authority (UK) to analyse the actual practice followed by UK banks in controlling money laundering risks in transactions involving commercial letters of credit. Findings The paper establishes that considering the formal nature of commercial letters of credit (which makes them independent from the underlying transaction), any stringent measures to regulate trade finance activities of a bank may destroy the effectiveness of commercial letters of credit as a tool for promoting international trade. The current law and regulations together with the Joint Money Laundering Steering Group Sectoral Guidance and the Wolfsberg Principles provide the requisite legal and regulatory framework to control money laundering risks in commercial letters of credit. The paper however establishes that the majority of banks in UK currently appear to be in danger of non-compliance with the UK AML regime and certainly need to meet their AML obligations in a more serious way. Practical implications The findings may influence banks to adopt a more vigilant approach in their trade finance activities and to undertake more responsibility in ensuring compliance with the current AML law and regulations, while highlighting that their current practice may put them in danger of non-compliance. Originality/value The paper demonstrates in an exceptional way the legal and regulatory requirements for banks to prevent money laundering risks in their trade finance activities and where, in practice, the banks are falling short of compliance with these requirements. By adopting a step-by-step approach in evaluating banks’ “current-and-must have” approach to controlling money laundering risks at various stages of a commercial letter, the paper makes a valuable contribution to the study of combating money laundering in commercial letter of credit transactions.

Risk Management Techniques and their Application to Documentary Discrepancy in Letter of Credit Transaction

Risk Management Techniques and their Application to Documentary Discrepancy in Letter of Credit Transaction

Mitigating the Risk of Fraud in Documentary Letters of Credit

Abstract 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.

The UCP 600 Rules In Letter Of Credit (LC): Selected Issues

The Uniform Customs and Practice (UCP) is the primary source for letter of credit (LC) transaction. Prior to the publication of the UCP, the rules in LC originating from trade customs and practices were not unanimously applied by traders. The International Chamber of Commerce (ICC) whose function is to harmonize the various trade customs practiced in LC, had initiated to compile those rules and published them under one specific reference and named it as the UCP. The UCP is always been updated in order to serve current market needs in regards to LC issues. Thus far, there is no specific statute regulated for LC. The UCP, though customary in nature and has no legal effect, has been adopted by more than 175 countries. Currently, it is unlikely to find the LC transactions, which is not governed by the UCP. Compared to the previous versions, the latest version of the UCP 600 is claimed to be comprehensive and offers modification to the preceding LC rules. This paper discusses the rules provided by the latest UCP 600 focusing on the significant issues in LC such as bankers’ autonomy, revocable and irrevocable LC, strict compliance, notice of refusal and fraud. Comparisons are scrutinized with the previous versions of the UCP and reviews are highlighted wherever necessary. In addition, reference is sought to case-law to illustrate certain issues. Furthermore, this paper examines the improvements contributed by these latest rules. Last but not least, it seeks to submit proposals for future improvement of the current UCP 600. Keywords: UCP 600; Letter of Credit; autonomy; strict compliance; notice of refusal, fraud.

An Examination of the Regulations on Non-documentary Conditions in Standby Letters of Credit Transactions

An Examination of the Regulations on Non-documentary Conditions in Standby Letters of Credit Transactions

A Review of Compliance Standards under International Letter of Credit Transactions

A Review of Compliance Standards under International Letter of Credit Transactions