Study Of Credit Fraud

Letter of credit (L/C) is a main legal instrument of international settlement which is widely used in international trade. It plays a more and more important role in economic activities. According to the legal system about L/C, the rights and duties of each party are clear. But sometimes somebody may want to embezzle the others' goods, money without consideration, and intentionally make a false impression or hide the truth to seduce the other parties to rely on the wrong knowledge and lose their property, or rights. This is L/C fraud. The L/C fraud is very harmful. It not only makes economic losses of the international trader, but also damages the order of financial management and international trade. So it's very necessary to analyze the L/C fraud.There are many kinds of L/C fraud. Subject to the form of the fraud, there is forging of documents, "soft clause" L/C, etc. Subject to the actor of fraud, there are fraud made by the applicant and the beneficiary, etc.There are many causes of the L/C fraud. We can analyze the causes from the subjective side and the objective side. From the point view of subject side, one is fraudulent conductors' greed, the other is the victims' lack of awareness of self-protection. So it will promote the fraud. For the objective side, there are two causes too. One is about the L/C legal system itself, the other is about other factors. In the former field, the "independent abstract" rule and the "strict compliance" rule of L/C have flaws for violators. The risks of these rules is serious, especially for the buyer, if the seller has the intention of fraud, he can use the forged documents "legally" so as to embezzle the price. As for the other factors, we can find that the preventive abilities of the traders and the banks is not enough, which makes the fraudulent intention can easily become a fact. Because L/C fraud are not treated as the violent crime, the legislation and the punishment in this field of the countries concerned are not severe or powerful. So the "great profit" and the weak punishment become the objective reasons of L/C fraud.L/C fraud is complex legal phenomenon, and the prevention of it is a great systematic engineering. Generally, it includes the strengthening legislation about L/C fraud and improving the abilities of the judges, etc. It's necessary to take the preventive measures for L/C fraud, and the writer argues that if legislation dealing with L/C fraud can be improved, and traders and banks can strengthen their self-protection awareness, L/C fraud will surely be reduced.