Trade Finance Fraud Prevention

International Trade Fraud is a significant danger for all those involved in international transactions.  A clear understanding of the most common fraud structures is crucial in identifying potential threats to your business.

In this unit you will:

- Examine the key international trade finance banking rules in respect of bank obligations and now they may impact on occurrence of a fraudulent international trade finance transaction.

Firstly we will Outline the key articles of UCP 600 underlying obligations of banks to each other in respect of a facially complying presentation.

Then we will Explain the provisions or articles of UCP 600 in respect of banks obligations when documents are not genuine or are falsified.

Next we will gain an understanding of how Bonds and Guarantees operate and how Standby Letters of Credit may be used to misappropriate funds and create schemes to defraud banks, individuals or institutions.

Having absorbed these concepts we will look at the Bank and Customer Relationship, the profile of the typical fraudster, how to do due dilligence and identify fraudulent transaction profiles.

By the end of this course you will be well equipped to identify the most common fraud schemes and have the skills to evaluate transactions and proposals allowing you to discern to a greater degree of accuracy than before if they are genuine or not.

In this learning unit the following topics are covered: 
1 - Specifics of Trade Fraud
2 - Letters of Credit and UCP 600 
3-  Bonds and Guarantees in Trade
4 - The Bank and Customer Relationship 
5 - Trade Finance Fraud Prevention
6 - The Fraud Exception and LC Independence Principle

Completing this course will confer 5 CPD Credits towards internationally recognised Continuous Professional Development Requirements within organisations operating this kind of staff development methodology.

Course Outline

1. Specifics of International Trade Finance Fraud

1.1 Definition of Trade Finance Fraud

2. Letters of Credit and UCP 600

2.1 Article 7 Issuing Bank Undertaking

2.2 Article 12 b. Nomination

2.3 Veracity of Documents

2.4 Acting in Good Faith

2.5 Entitlement to Reimbursement

2.6 Case History - Fake Inspection Certificate Presented

3. Bonds & Guarantees in International Trade

3.1 Definition of a Bond/Guarantee

3.2 Reasons for Requiring a Guarantee

3.3 Issuers of Guarantees

3.4 Direct / Indirect Guarantees

3.5 Categories of Bonds or Guarantees

3.5.1 Customer Implications re. Issued Bonds and Guarantees

3.6 Banks Consideration when Issuing a Demand Guarantee

3.7.1 Wording in Bonds/Guarantees Issued by a Bank

3.8 The Guarantee and the Contract

3.9 Standby Letter of Credit

3.10 Guarantees, Standby LCs & Fraud - Example Scenarios

4. The Bank and Customer Relationship

5. Trade Finance Fraud Prevention

5.1 The Occurrence of Letter of Credit Fraud

5.2 User of Trusted Third Parties

5.3 Highly Complex Transactions to Cause Confusion

5.4 Authentication of Documents

5.5 Money Laundering

5.6 Overcoming inadequate AML Legislation

5.7 The use of technology to avoid trade finance fraud

6. LC Independence Principle & Fraud Exception

Further Reading

1 – A Comparative Analysis of the Standard of Fraud Required under the Fraud Rule in LC Law

2 – Preventing Letter of Credit Fraud

3 – The Fraud Exception in LCs : A Global Analysis

4 – Money Laundering and Financial Crimes Caribbean

5 – Documentary Credits in International Transactions with a special focus on the Fraud Rule

6 – International Trade Fraud

Forum Assignment



Our Trade Finance courses were awarded Best Online Trade Finance Accredited Courses Globally by Capital Finance International Magazine in 2019!  Our trade finance online training offerings are endorsed by the International Finance Corporation for professional development in this area by its issuing and partner banks.  Our online certificate program is a great value for money way to prepare for the exams of the CDCS and CITF exams.  All our courses are also accredited for Continuous Professional Development (CPD) purposes by the CPD Certification Service of the United Kingdom which confirms they meet international CPD standards.