Letter of Credit Forum

I have only recently joined this on-line forum and have been happily reading the L/C forum questions and also answering a few, but I must say that I am horrified at the number of postings from people trying to act as international traders and use transferable L/C's or back-to-back L/C's to obtain settlement.

 I am an international trade banker who has worked in England, Switzerland, Germany, South Africa, Iraq and now Canada with over 30 years experience and please believe me when I tell you, if it looks too good to be true, it probably is.

An enormous (multi billion dollar) fraud industry has grown up around these bank instruments in just about every continent.  The most common indicators that the deal you are working on is fraudulent are :

1. 2% Performance Bond

2. Fully Funded/Fully Supported

3. Proof of Funds/Proof of Product

4. Soft Probe

5. Bank Comfort Letter

Any of these ring bells?  If you hear of these in connection with a transaction do not provide any personal or corporate details, do not provide banking details and if at all possible walk away from the transaction.

One posting here was asking how long it takes to get a Standby L/C opened and sent from the issuing bank to bank b and then on to bank c and finally to the beneficiary - oh, and by the way, it was for $35million - COME ON PEOPLE, please use some common sense here.  If a buyer had the financial clout to be able to issue a payment commitment for $35,000,000 would he be buying through a middle man?  This is an amount that would have serious capital impact for the issuing bank and may well be on the radar of the central bank in the issuing country.

Being able to successfuly negotiate under a transferable L/C is a very complicated and technical exercise.  As a trading company that sells though a buyers L/C you must be fully conversant with UCP 600, Incoterms 2000 and be very proficient with document production and delivery methods.

Now I am not saying quit completely, but please be reasonable in your targets and expectations.   If you receive and enquiry from your on-line trading posting for a multi million dollar deal, ask yourself why they are coming to you with this?  If the commodity involved is one that is openly traded on the commodities market (oil/sugar etc.) why is the price they are quoting below market value - I will say again "if it looks too good to be true, it probably is"

Don't be dazzled and sucked in by $$$$ signs, I will guarantee that for every 100 enquiries you receive, one may be genuine - please use care when dealing with the enquiries and make sure you can always walk away without providing damaging details that could cost you dearly.

I would be interested to hear other members experiences or general comments on this posting.

Peter M