Although there is no foolproof method to detect or prevent a letter
of credit fraud, there are key warning signs that may indicate fraud and the need for
caution. Documentary products personnel and account officers must be familiar with the
various red flags to effectively minimize the risk of fraud. Some of the signs include:
 |
Documentation discrepancies |
|
A letter of credit with one of the following items
missing:
The name and
address of the applicant or beneficiary,
The name and
address of the issuing or advising banks,
A specified
or determinable amount and type of currency,
A sight or
time draft to be drawn,
An expired
date,
A general
description of the merchandise, or
The types
and numbers of documents that must accompany
the credit. |
|
An unsigned letter of credit. |
|
Numerous inquiries by the beneficiary regarding the credit's
issuance; a sense of urgency and/or angry complaints displayed
by the beneficiary. |
|
Presentations of letter of credit or documents where the bank
has no record of the credit's existence. |
|
Letters of credit opened by telex when the telex has not been
tested with the receiving bank. |
|
Letters of credit involving obscure ports and/or locations
that cannot be contacted by telephone or telex. |
|
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