Article

US' Iranian bank sanctions approved

Sanctions imposed by the US on an Iranian bank do not contravene foreign exchange rules, according to an International Monetary Fund (IMF) spokesman. He was responding to a request from Tehran asking the IMF to determine whether Washington's actions were legal.

Iran said during its talks with the IMF that since the US embargo on Bank Saderat, it had been unable to issue L/Cs in dollars, which was affecting deposits. The Iranians also said that several Bank Saderat correspondent banks in Europe and Asia that have ties to the US had refused to allow the bank to operate in other currencies.

The IMF was apparently unmoved by Iran's arguments. "We advised the authorities that the new US measures do not give rise to an exchange restriction," IMF spokesman William Murray said.

L/Cs and Iraq fraud

A report in a British newspaper says letters of credit (L/Cs) may be central to investigations into a multi-billion dollar alleged fraud in Iraq in which at least one British company was paid for armoured vehicles ordered by the Coalition Provisional Authority (CPA).

The vehicles were never delivered, according to the Guardian newspaper, which quotes one of the business people involved in the deal saying he suspects documents associated with an L/C held by JP Morgan Chase in Britain were forged.

The Guardian report says accusations contained in a confidential statement lodged with a New York court name three British companies engaged in this apparently large-scale fraud. Investigations are expected to focus on documents presented to L/C holder JP Morgan Chase, which was acting in Britain on behalf of the Iraqi Trade Bank. The documents apparently suggest that a shipment of vehicles destined for Iraq was about to be shipped from Russia.

A businessman familiar with the case said: "From what I know, the office in Baghdad that was signing all these letters of credit had only three employees - the president, his driver and a tea boy. He was there all day simply signing letters of credit."

L/Cs for exports to Cuba

Letters of credit, which are required by law for US exports of food and medicine to Cuba, may soon not be needed. New legislation backed by the American Farm Bureau Federation (AFBF) would make it easier for US firms to export to the island state and allow Cuban importers to pay their US suppliers direct.

The ailing health of Cuba's President Fidel Castro is raising the prospect of better relations and trading links between the US and Cuba. Trade with Cuba is very limited due to embargoes that date back to 1961 and which were supposed to limit Castro's power base.

Last year's transfer of power from the Cuban leader to his brother Ra�owever, has US companies wondering whether a thaw in relations is likely.

If passed by Congress, the legislation backed by AFBF would allow Cuba's state-owned agricultural import company Alimport and other Cuban buyers to wire money directly to their suppliers' banks in the US. Current US legislation forces exporters to use banks in third-party countries in L/C transactions.

In 2000, Congress passed the Trade Sanctions Reform and Export Enhancement Act that allowed limited exports to Cuba such as food, agriculture and medical products for humanitarian reasons.

Memoriam: Paul S. Turner

It is with sadness that DCInsight reports the death of Paul Turner, one of the regular past contributors to this magazine. Paul's perceptive articles graced our content and were regularly praised by Insight readers. The author of numerous books and articles, Paul wrote in part: "I first became familiar with the risks of payment systems as a lawyer at Occidental Petroleum Corporation, advising the Occidental treasury department. I then became an advisor to the uniform law commissioners who wrote Article 4A (Funds Transfers) of the Uniform Commercial Code (U.C.C.) and revised U.C.C. Articles 3 (Negotiable Instruments), 4 (Bank Deposits and Collections), and 5 (Letters of Credit)." Paul will be sorely missed.