Corporate letters of credit and their usage as an instrument for fraud

Ali Polat ()

Journal of Financial Crime, 2012, vol. 19, issue 2, 213-225

Abstract: Purpose - This paper seeks to examine the differences between traditional documentary credits and corporate issued documentary credits and to show the effects of these differences on the application of documentary credits within a fraud context. Design/methodology/approach - The objective of the paper is achieved by analysis of relevant documents of related institutions together with some examples of works done by the authors from the field. Findings - It is found that the documentary credits issued by corporations can be a tool for financial fraud due to lack of information in classifications and lack of experience for this product. Practical implications - Companies dealing with international trade can benefit from the risk involved in that type of transactions. It is also possible that a new classification can also be arranged including corporate letters of credits. Originality/value - The paper covers a topic which is almost untouched. As the number of documentary credits that are issued by corporates are rare and this is not also well documented in the theory was shown by this research. The absence of the information in theory and practice gives room to the fraudster.

Keywords: Letter of credit; Documentary credit; Corporate finances; Fraud (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:13590791211220476

DOI: 10.1108/13590791211220476

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