In answer to your question “How many types of LC do we have?” – there are numerous types, categorized based on their terms, usage, and risk profile. Main Classifications of Letters of Credit (LCs): 1. Based on Revocability: Revocable Letter of Credit: The issuing bank or the applicant (buyer) can amend or cancel the credit at any moment without prior notice to the beneficiary (seller). This type is rarely used...Continue Reading
Identify; Verify; Document; Restrict — these are the four key steps. Insist on an MT760 + confirmation from a reputable bank. Draft the SBLC text precisely and with a focus on documentation (avoid ambiguous phrases). Use escrow and tripartite agreements in large transactions. In case of a suspicious payment, take immediate legal and inter-bank action and preserve the SWIFT network message as evidence. Training the legal/financial team and establishing direct...Continue Reading
Issuance of a Fake SBLC / or Fake SWIFT Message (Fake MT760) Criminals or intermediaries create a counterfeit version of an SBLC and use it to deceive the seller. Issuance of an SBLC from a Low-Credit or ‘Pseudo-Bank’ Lacking Payment Ability A weak or non-credible bank appears to provide a guarantee but in practice lacks the necessary liquidity/credit. Malicious Use of the “On-Demand / Payable at Sight” Wording The buyer...Continue Reading
🔹 Introduction A Standby Letter of Credit (SBLC) is fundamentally a banking guarantee instrument, serving as a conditional and irrevocable payment undertaking issued by an Issuing Bank in favor of a Beneficiary. In international trade, the SBLC is one of the most reliable tools for building trust between transacting parties. At a more advanced level, however, many financial institutions and development banks use SBLCs as collateral to secure secondary credit...Continue Reading
1) For the Beneficiary – Ensuring Payment and Reducing Risk Request a Confirmed SBLC: Request that the beneficiary’s bank (or a reputable third-party bank) confirms the SBLC. This creates a payment undertaking from two banks (issuing + confirming bank) and reduces the risk related to the issuing bank. Direct MT760 Receipt: Request the transmission of a SWIFT MT760 message, which proves the authenticity of the SBLC and can be used...Continue Reading
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