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Your Letter of Credit Partner
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Risk:
General Risks
• If goods are being offered for sale at a price that is too good to be true, then it probably
is too good to be true.
Fraud Risks
• The payment will be obtained for nonexistent or worthless merchandise against presentation by the Beneficiary of forged or falsified documents.
• Credit itself may be forged.
Sovereign and Regulatory Risks
• Performance of the Documentary Credit may be prevented by government action outside the control of the parties.
Legal Risks
• Possibility that performance of a Documentary Credit may be disturbed by legal action relating directly to the parties and their rights and obligations under the Documentary Credit
Force Majeure and Frustration of Contract
• Performance of a contract – including an obligation under a Documentary Credit relationship – is prevented by external factors such as natural disasters or armed conflicts
Risks to the Applicant
• Non-delivery of Goods
• Short Shipment
• Inferior Quality
• Early /Late Shipment
• Damaged
in transit
• Foreign exchange
• Failure of Bank viz Issuing bank / Collecting Bank
Risks to the Issuing Bank
• Insolvency
of the Applicant
• Fraud Risk, Sovereign and Regulatory Risk and Legal Risks
Risks to the Reimbursing Bank
• no obligation
to reimburse the Claiming Bank unless it has issued a reimbursement undertaking.
Risks to the Beneficiary
• Failure to Comply with Credit Conditions
• Failure of, or Delays in Payment from, the Issuing
Bank
• Credit Issued by Party other than Bank
Risks to the Advising Bank
• The Advising Bank's only obligation – if it accepts
the Issuing Bank's instructions – is to check the apparent authenticity of the Credit and advising it to the Beneficiary.
Risks to
the Nominated Bank
• Nominated Bank has made a payment to the Beneficiary against documents that comply with the terms and conditions
of the Credit and is unable to obtain reimbursement from the Issuing Bank
Risks to the Confirming Bank
• If Confirming Bank's
main risk is that, once having paid the Beneficiary, it may not be able to obtain reimbursement from the Issuing Bank because of insolvency
of the Issuing Bank or refusal of the Issuing Bank to reimburse because of a dispute as to whether or not payment should have been
made under the Credit