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( Source of the document: ICC Digital Library )
No extradition for alleged Iranian fraudsters
Two Iranians already on trial in Dubai for offences related to letter of credit fraud will not be extradited from Dubai to their homeland. This follows a decision by the Dubai Court of Appeal, which was responding to requests for the men to be tried for the same alleged crimes in Iran. A Dubai court is already in the process of trying the men for their supposed roles in a multi-million US dollar L/C fraud case. The defendants allegedly attempted to defraud Iran's Bank Saderat of USD 23 million. A witness told the Dubai Criminal Court that three companies in Iran opened a L/C for a company called Sinashore. The aim was to buy an amount of gold from Sinosure. Money was deposited at Bank Saderat's branch in Murshid Bazaar. Documents were then submitted claiming payment under the L/C, even though no gold was delivered. Bank Saderat then discovered that the documents accompanying the L/C were false.
Moody's and L/C-backed bonds
As of this writing, Moody's was considering downgrading its ratings on L/C-backed US municipal bonds. This is because the ratings agency is considering changing the way it rates variable rate demand notes (VRDNs), which are bonds used by US states, municipalities and government agencies to raise funds. The rates on these bonds are varied from time to time, thus creating a secondary market in which investors can buy and sell them. Many of the bonds, particularly those issued during the credit crunch, are backed by bank L/Cs.
The L/Cs allow issuers to borrow at a lower rate. Media reports suggested that Moody's may downgrade the ratings of 898 VRDNs by up to three notches within the next 60 days. It was anticipated that most VRDNs would be cut by less than two notches.
L/Cs hard to come by at UAE banks
A fall in the value of L/Cs opened by the UAE's banks is being seen as a sign that credit remains tight in the federation. According to a Dubai business leader, small- and medium-sized enterprises (SMEs) are finding it particularly difficult to obtain credit from risk-averse banks. Despite high liquidity levels amongst the UAE's banks, an officer at the Dubai Chamber of Commerce and Industry said banks are not making credit available to smaller firms. The UAE Central Bank meanwhile has reported that the value of new L/Cs opened in the federation fell by nearly three per cent in July compared with June. The value of L/Cs dropped from 3.2 billion UAE dirham (AED3.2bn) to AED107.6bn over that period. Deposits with the banks meanwhile soared to nearly AED1 trillion in July, the highest since November 2009.
China and the death penalty for L/C fraudsters
China is considering dropping the death penalty for letter of credit frauds and several other types of financial and non-violent crimes. A proposed amendment to China's criminal law would reduce the number of crimes carrying the death penalty by 13, but 55 crimes will still carry the threat of capital punishment. The proposal comes amidst pressure from legal scholars and reformers in China who argue that people guilty of relatively trivial non-violent crimes have been executed. Financial crimes, including the use of fraudulent L/Cs, financial bills and tax invoices, would be exempted from the death penalty under the proposed reforms.
Algeria's controversial L/C law
Algeria is considering repealing a recent law making it compulsory for importers to use letters of credit. The move follows robust lobbying against the law by Algerian traders. The Algerian finance minister presented the Algerian cabinet with two draft bills relating to the 2010 supplementary budget law and the monetary and credit law. At the heart of these drafts is a proposal to suspend the compulsory use of L/Cs to import goods. If the law is ratified, importers will no longer have to open L/Cs up to the value of two million Algerian dinars.