Standby Letters of Credit - Structure, Usage, and Fraud

COURSE PREVIEW

By: Alan C.Y. Liu

 

4. Performance Bond/Performance Guarantee

Applicant : Hongkong Company (full address), Hong Kong
SLC issuing bank : HK Commercial Bank (full address), Hong Kong
Beneficiary : Taiwan Company (full address), Taipei, Taiwan
SLC advising bank : Taiwan Commercial Bank (full address), Taipei, Taiwan

To: Taiwan Commercial Bank, Taipei (SLC advising bank)
From : HK Commercial Bank, Hong Kong (SLC issuing bank)

At the request of Hongkong Company (full address), we hereby issue our irrevocable Standby Letter of Credit No. 12345 for USD200,000.00 (Say US Dollars Two Hundred Thousand Only) in favor of Taiwan Company (full address) as the Performance Bond required under the Contract No. 7890 signed between the Applicant and the Beneficiary.

This L/C is available by Beneficiary's Sight Draft(s) drawn on us accompanied by signed Beneficiary Statement certifying that Hongkong Company have failed to fulfil the contractual obligations under the Contract No. 7890 signed between the Applicant and the Beneficiary.

This L/C will expire on December 9, 1998 in Taiwan.

Partial drawings are not allowed.

Documents must be presented to Taiwan Commercial Bank, Taipei, for negotiation.

All banking charges outside Hong Kong are for account of the Beneficiary.

Documents must be sent to HK Commercial Bank (full address) by courier service or registered airmail.

We agree with Beneficiary that Draft(s) drawn under and in compliance with this L/C terms will be duly honored if presented with the signed Beneficiary Statement on or before the expiry date. Upon receipt of documents in order, we will remit proceeds according to the instructions of Taiwan Commercial Bank.

This L/C is subject to UCP (1993 Revision), ICC Publication No. 500. This is the operative credit instrument and no mail confirmation will follow.

 

FRAUDULENT Standby Letter of Credit

1. SLC FORMAT (FRAUDULENT)

We hereby open our unconditional, irrevocable, transferable and confirmed Standby Letter of Credit No. ........... in favor of ........................... for the amount of United States Dollars ................................ for the account of ................................... due in one year and one day from the date of issue. Payment is available upon Beneficiary's Draft drawn on us or on first written demand via key tested telex.

Draft hereunder must be marked drawn under Standby Letter of Credit No. KKK................ dated .................... and to expire on .............................

We engage with you that the Draft drawn under and in compliance with the terms of this Letter of Credit shall be honored upon due presentation to us.

This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), ICC Publication 500.

This is an operative negotiable instrument and no mail confirmation will follow.

(Note : KTT : Key Tested Telex)

 

2. SLC FORMAT (FRAUDULENT)

ICC FORM 3039/ICC FORM 3034

We hereby establish our irrevocable and transferable Credit in favor of ......... (name of lending bank) ..... for the account of .............. Draft drawn on .......... (SLC issuing bank's name and address) ..... in the amount of ............................. United States Dollars.

This Draft may be negotiated on ...... (maturity date) ......... but not later than 15 days after the maturity date.

This Credit is transferable without presentation of it to us and the payment of any transfer fee.

We hereby agree with the drawers, endorsers and bona fide holders of Draft drawn under and in compliance with the terms of this Credit that the same shall be duly honored on due presentation to us.

This Credit is subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), ICC Publication No. 500

 

3. SLC SAMPLE (FRAUDULENT)

Subject : Standby Letter of Credit
Issue Date : June 10, 1998
Maturity Date : June 9, 1999
Expiry Date : Ten (10) international banking days after maturity date

We hereby issue our irrevocable and transferable Standby Letter of Credit No. ........... in favour of ............................. for USD10,000,000.00 (Ten Million US Dollars), available by your Sight Draft(s) drawn on us upon maturity date.

The Draft(s) drawn under this Credit must bear on its face the clause "Drawn under Standby Letter of Credit No. ........................ issued by ............................ on June 10, 1998."

We hereby irrevocably and unconditionally undertake to reimburse you as per your instructions upon receipt of Draft(s) and documents in compliance with the terms of this Credit that the same shall be duly honoured on presentation to us at maturity.

This Credit is transferable without presentation of it to us and the payment of any transfer fee.

This Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), ICC Publication No. 500

This telex is the operative instrument and no mail confirmation will follow.