Updated : 2015-01-02 18:38
Warning issued against L/C fraud
By Kim Jae-won
The Financial Supervisory Service (FSC) said Friday that it warned banks against hoax letters of credit (L/C), purportedly issued in the name of some foreign lenders. “We sent a letter to local lenders and branches of foreign banks to strengthen their process in managing letters of credit,” said an official at the FSC. Woori Bank and several other local banks recently discovered false letters of credit allegedly issued by foreign banks, officials said.Woori’s Wonnam-dong branch in Seoul received an e-mail supposedly from an official from a Wells Fargo’s New York outlet last month, confirming a standby letter of credit guaranteeing a 50 million euro (66 billion won) payment should a Korean trading company fail to pay back its loans.
A standby L/C is a guarantee of payment issued by a bank on behalf of a client should the client fail to fulfill a contractual commitment with a third party.
Concerned over the large amount of the guarantee, the lender checked it out with Wells Fargo’s Seoul branch which reported it to its headquarters. Woori found out that neither the U.S. lender’s main office, nor any other outlet issued the letter.
“The form of the fake L/C was similar to a real one from Wells Fargo. We reported the case to the police,” said Lee Jong-soo, a spokesman for Woori.
Earlier in June, a similar case also happened at Standard Chartered Bank Korea, local media reported.
A Korean company asked the local unit of the U.K.-based lender for a loan with a fake $100-million standby letter of credit allegedly issued by Citibank Philippines.
Analysts said that over 90 percent of L/C frauds are created by amateurs who establish their companies originally to do legitimate international trade.