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Letter of Credit Fraud

Letter of Credit Fraud. By: Sage Richards. What is a Letter of Credit?. Letter of Credit- A finical contract between bank, customer, and beneficiary (seller); that involves transfer of goods or services.

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Letter of Credit Fraud

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  1. Letter of Credit Fraud By: Sage Richards

  2. What is a Letter of Credit? • Letter of Credit- A finical contract between bank, customer, and beneficiary (seller); that involves transfer of goods or services. • Purpose- substituting the credit of the bank for that of the customer, for the purpose of facilitating trade. • In the event that the buyer cannot make a payment the bank will cover the outstanding amount. • Example: You want to buy a $50,000 truck from Dodge, which agrees to sell the truck and gives you 60 days to pay it with the condition that you provide them with a 98 days letter of credit for the full amount.

  3. Example Letter of Credit

  4. Elements of a Letter of Credit • Payment undertaking given by a bank • On behalf of a buyer • To pay a seller • On presentation of specified documents representing the supply of goods • Within specified time limits • Documents must conform to terms and conditions set out in the letter of credit • Irrevocable guarantee of payment to a seller.

  5. Process

  6. TheFraud • The scammer attempts to make money with faulty business transactions or tells the victim that the letter of credit is an investment. • Scammers will promise to ship the items in exchange for payment, only to disappear after receiving the money. • Another way is that the scammer will tell the victim that it is an investment, though this type of investment does not exist. • By being well educated about financial frauds you make yourself much less likely to fall victim to them. Being aware is the first step to being safe.

  7. Bibliography • "Figure 13 - Irrevocable Letter of Credit." Figure 13 - Irrevocable Letter of Credit. N.p., n.d. Web. 26 Oct. 2015. • "Fraud Safety." FBI. FBI, 17 Mar. 2010. Web. 26 Oct. 2015. • "Letter Of Credit Definition | Investopedia." Investopedia. N.p., 23 Nov. 2003. Web. 26 Oct. 2015. • The Life Cycle of a Letter of Credit. Digital image. Career City. N.p., n.d.Web.

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