Fraud And Prevention In Letter Of Credit

Letter of Credit is the most important form of payment and clearing in international trade final estimate. It promotes with the development of international trade in 19th century. Gleaming with letter of credit is safer than other forms. Because using letter of credit, banker's credit insteads of commercial credit. That is to say, while the document is conforming to the provisions of the letter of credit, the bank will bear the payment responsibility first.Credits are seperate transactions from the sales or other contract. In credit operations, all parties concerned deal with document, and not with goods. In addition, due to the parties of letter of credit are in different countries or regions as well as some illegal business occure frequently, the business of letter of credit has been raisen risks and some fraud actions appear.Fraud causes severe loss to honest trade parties and banks of export and import countries. It also destroys normal order of international trade and international economy. At present, various countries have different legislation situation and have not united understanding on what fraud in letter of credit is. Our country's legislation in this aspect is more backward, mostly adopting domestic laws and international practices. Nowadays the commonly used legal practice in the world is the No. 500 publication of the Uniform Customs and Practice for Documentary Credits, that is UCP 500.With the development of our country's reform and opening-up, China will enter into WTO, international trade will be developed further and letter of credit will be used in international trade more frequently. At the same time, fraud in letter of credit will occur more frequently. Over recent years, numerous cases concerning fraud in letter of credit have shown the necessity to resolve problems in this field. Some scholars in our country have made wide research fraud in letter of credit and raised some prevention ways.The most important for the research of fraud in letter of credit and its prevention is a wide and deep research. Absorbing people's research results and concluding my own experience of working in international business office in bank, I try to raise my understanding to this issue, so as to do some helps in this field.