Precautions Against Letter Of Credit Fraud

The applicant (importer) of the letter of credit is the final payer of the letter of credit. The biggest fraud that the importer faces is the goods fraud, that is, after the payment is received, the inferior goods or even the goods can not be received, the importer should take the following precautions.

1., make good investigation in advance.

For importers, the credibility of trading partners is the key to prevent letter of credit fraud.

Before signing a sales contract by letter of credit, it is necessary to have a detailed understanding of each other's credit, which is directly related to whether the other party has the ability to perform and whether it can perform the contract honestly and trustworthiness.

In practice, importers in international trade should investigate their creditworthiness through the credit rating agencies of the exporters, the trade associations and other organizations, and establish a complete supplier file for future enquiries.

In short, importers' prudent actions before trading can effectively prevent and reduce the occurrence of letter of credit fraud.

2., choose appropriate trade terms to strive for the right to choose shipping companies, banks and insurance companies.

For importers, the choice of the FOB price term can control the right to choose the trading rights of the charters and the insurance of the goods. On the one hand, importers can choose the reputable shipping companies that they are familiar with, and on the other hand, the importers can also send people to the loading port to check and check whether the goods meet the requirements of the contract, and stop the seller's fraud in goods.

3., the terms of the letter of credit are clearly established and the documents are strictly examined.

Importers should provide specific and specific requirements for bills of lading, insurance policies, commercial invoices, quality inspection certificates, etc. according to the specific requirements of the contract, so as to prevent exporters from presenting documents that are not in conformity with the contract and comply with the letter of credit for loopholes.

It is especially important for exporters to examine documents strictly. Not only do they refuse to pay when a document is not found, it is more important that the exporter should refuse to pay the goods with the discrepancy of the documents in case of malicious fraud, so as to reduce or avoid losses.

(two) the beneficiary's protection is the beneficiary of the letter of credit. In order to recover the money in time, the following measures should be taken.

1. carefully concluded the terms and conditions of the letter of credit in the contract for the sale of goods.

A contract of sale is a contractual document that constrains the trade behavior between buyers and sellers. Each party has the right to claim for breach of contract.

In order to prevent the importer from using the "soft terms" of the letter of credit to cheat, the exporter should be careful and careful in concluding the terms of the letter of credit, and try not to accept the "soft clause". In actual business operations, he should overcome the anxiety of rushing to earn foreign exchange for export and neglecting risk prevention.

2., strictly examine the letter of credit and make the documents carefully.

After receiving the letter of credit from the bank, the exporter should make a comprehensive review of the sales contract, so as to avoid the discrepancy between the terms of the counterfeit letter of credit or the letter of credit and the contract, or the "soft terms".

At the same time, a series of documents required by the letter of credit should be made conscientiously to ensure that the documents are strictly consistent with each other, so as not to give the other party the chance to refuse to pay.

(three) banks should take precautions against the fraud of letter of credit, and banks play a key role in it. In order to effectively play the role of bank checks, we should start from the following aspects.

The 1. bank, as the issuing bank or the advising bank of a letter of credit, should clarify its responsibilities and obligations to provide effective and thoughtful services to its customers.

In particular, the issuing bank should establish the risk awareness of the first payment responsibility.

After receiving the L / C, the advising bank must check the signature or mortgage, confirm the truth, and stop the counterfeit letter of credit.

Where the beneficiary is inexperienced and does not know how to verify the bank, the bank should inquire and clarify the issuing bank to receive the letter of credit's delay, incomplete or other errors to avoid the soft clause letter of credit.

The 2. banks should establish and improve various internal rules and regulations and self-discipline mechanisms, strengthen awareness of risk prevention, strengthen their legal awareness and improve their professional quality.

The improvement of internal staff quality is the basis for banks to guard against all kinds of measures, and is also an important prerequisite for preventing the conspiracy of insiders and lawless elements from cheating.

In the process of handling the letter of credit, the 3. bank, in addition to strictly implementing the state's foreign exchange management policy, must also strengthen the examination of the issuing section, and strengthen the investigation of the credit of the business customers.

In terms of specific implementation, banks can establish statistics of clients' opening documents, carefully calculate the customers' past letters of credit, and acquire the latest factors affecting their credit changes and their latest credit status through their extensive branches and outlets, as well as flexible and fast information systems.

4., while actively expanding the international business network, we should remain vigilant and choose a bank with sound credit as a business partner.

Letter of credit payment is realized through the international business network of banks. The good reputation of banks and good cooperation between banks will undoubtedly facilitate the timely pmission of information and facilitate cooperation between banks to crack down on letter of credit fraud.

In addition, because the letter of credit is a typical pnational fraudulent activity, the effective cooperation of the international community is of great significance to prevent and control the fraud of letter of credit. By strengthening the information exchange among countries and the format of uniform documents, we can effectively prevent the fraud of letter of credit.