Fraud in letter of credit - Malaysian banks' perspective

Letter of credit (LC) is a payment mechanism in international trade which is claimed to provide utmost security to the contracting parties compared to other methods of payment. The security provided by this device however does not extend to fraud risk. The nature of LC transactions and rampant deve...

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Main Authors:	Che Hashim, Rosmawani, Othman, Ahmad Azam, Abdul Aziz, Akhtarzaitie
Format:	Conference or Workshop Item
Language:	English English English English
Published:	2011
Subjects:	K Law (General)
Online Access:	http://irep.iium.edu.my/38422/ http://irep.iium.edu.my/38422/1/Fraud_in_LC_-_Malaysian_Banks%27_Perspective_UUM2011.pdf http://irep.iium.edu.my/38422/2/UUM2011_fraud_-LATEST.pdf http://irep.iium.edu.my/38422/3/The_Sixth_UUM_International_Legal_Conference_2011.pdf http://irep.iium.edu.my/38422/10/ILC2011_Parallel_Sessions.pdf

id	iium-38422
recordtype	eprints
spelling	iium-384222015-01-08T03:15:34Z http://irep.iium.edu.my/38422/ Fraud in letter of credit - Malaysian banks' perspective Che Hashim, Rosmawani Othman, Ahmad Azam Abdul Aziz, Akhtarzaitie K Law (General) Letter of credit (LC) is a payment mechanism in international trade which is claimed to provide utmost security to the contracting parties compared to other methods of payment. The security provided by this device however does not extend to fraud risk. The nature of LC transactions and rampant development in technology has opened a pathway for fraudster to capitalize on the dependence of the parties to the LC transactions on paper-based documentation. Since LC documents can be easily fabricated, there are many occasions in which the payment by LC was refused in introductory trade relationship due to suspicion of fraudulent documents. Moreover, the existence of fraud may destroy the smooth flow of LC procedure of payment and cause a disaster to the whole transaction. Consequently, fraud in LC transaction will frustrate the parties involved such as buyer, seller as well as banker. This paper aims to examine the fraud climate in LC transactions with special reference to Malaysian banks practices. Furthermore, it seeks to identify the modus operandi used by fraudsters in LC transactions in Malaysia. Last but not least, it highlights the actions undertaken by Malaysian banks in dealing with fraud in LC transactions. Due to lack of published materials and written information of this issue in Malaysia, interviews were conducted with LC’s key person and experts to explore the real situation. The finding of this study established that the phenomenon of fraud in LC transaction is not uncommon in Malaysia where its occurrence is marginal and not negligible. 2011 Conference or Workshop Item NonPeerReviewed application/pdf en http://irep.iium.edu.my/38422/1/Fraud_in_LC_-_Malaysian_Banks%27_Perspective_UUM2011.pdf application/pdf en http://irep.iium.edu.my/38422/2/UUM2011_fraud_-LATEST.pdf application/pdf en http://irep.iium.edu.my/38422/3/The_Sixth_UUM_International_Legal_Conference_2011.pdf application/pdf en http://irep.iium.edu.my/38422/10/ILC2011_Parallel_Sessions.pdf Che Hashim, Rosmawani and Othman, Ahmad Azam and Abdul Aziz, Akhtarzaitie (2011) Fraud in letter of credit - Malaysian banks' perspective. In: The Sixth UUM International Legal Conference 2011 (ILC 2011), 19th - 20th Nov 2011, Batu Ferringghi, Penang. (Unpublished)
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English English English
topic	K Law (General)
spellingShingle	K Law (General) Che Hashim, Rosmawani Othman, Ahmad Azam Abdul Aziz, Akhtarzaitie Fraud in letter of credit - Malaysian banks' perspective
description	Letter of credit (LC) is a payment mechanism in international trade which is claimed to provide utmost security to the contracting parties compared to other methods of payment. The security provided by this device however does not extend to fraud risk. The nature of LC transactions and rampant development in technology has opened a pathway for fraudster to capitalize on the dependence of the parties to the LC transactions on paper-based documentation. Since LC documents can be easily fabricated, there are many occasions in which the payment by LC was refused in introductory trade relationship due to suspicion of fraudulent documents. Moreover, the existence of fraud may destroy the smooth flow of LC procedure of payment and cause a disaster to the whole transaction. Consequently, fraud in LC transaction will frustrate the parties involved such as buyer, seller as well as banker. This paper aims to examine the fraud climate in LC transactions with special reference to Malaysian banks practices. Furthermore, it seeks to identify the modus operandi used by fraudsters in LC transactions in Malaysia. Last but not least, it highlights the actions undertaken by Malaysian banks in dealing with fraud in LC transactions. Due to lack of published materials and written information of this issue in Malaysia, interviews were conducted with LC’s key person and experts to explore the real situation. The finding of this study established that the phenomenon of fraud in LC transaction is not uncommon in Malaysia where its occurrence is marginal and not negligible.
format	Conference or Workshop Item
author	Che Hashim, Rosmawani Othman, Ahmad Azam Abdul Aziz, Akhtarzaitie
author_facet	Che Hashim, Rosmawani Othman, Ahmad Azam Abdul Aziz, Akhtarzaitie
author_sort	Che Hashim, Rosmawani
title	Fraud in letter of credit - Malaysian banks' perspective
title_short	Fraud in letter of credit - Malaysian banks' perspective
title_full	Fraud in letter of credit - Malaysian banks' perspective
title_fullStr	Fraud in letter of credit - Malaysian banks' perspective
title_full_unstemmed	Fraud in letter of credit - Malaysian banks' perspective
title_sort	fraud in letter of credit - malaysian banks' perspective
publishDate	2011
url	http://irep.iium.edu.my/38422/ http://irep.iium.edu.my/38422/1/Fraud_in_LC_-_Malaysian_Banks%27_Perspective_UUM2011.pdf http://irep.iium.edu.my/38422/2/UUM2011_fraud_-LATEST.pdf http://irep.iium.edu.my/38422/3/The_Sixth_UUM_International_Legal_Conference_2011.pdf http://irep.iium.edu.my/38422/10/ILC2011_Parallel_Sessions.pdf
first_indexed	2023-09-18T20:55:12Z
last_indexed	2023-09-18T20:55:12Z
_version_	1777410258036064256

Fraud in letter of credit - Malaysian banks' perspective

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