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( Source of the document: ICC Digital Library )
Iranian fraud trial continues
The trial is continuing of people allegedly involved in the highly politicized multi-billion US dollar frauds involving letters of credit in Iran. Meanwhile, press reports suggest that bankers at one of the banks allegedly involved in the fraud may have known about it.
Dozens of people, including senior bank officials and one of Iran's top businessmen, are being investigated for their roles in the alleged US$2.8 billion financial scandal in which L/Cs are supposed to have played a big role. Some of those under investigation have now been brought to trial - a process made difficult by the absence of key witnesses. These include the former head of Iran's Bank Melli, Mahmoudreza Khavari, who reportedly fled to Canada soon after news of the alleged frauds broke last year.
Meanwhile, Iran's Fars News Agency has reported that employees at all levels of Bank Melli were well aware of the L/C frauds. Also, the prosecutor at the trial in which some of the suspects in the alleged frauds have already appeared has expressed surprise that after eight months, neither Bank Melli nor the court has heard any complaints from bank employees. He also noted that there have been no requests from the bank for the return of allegedly stolen funds.
Alternative to L/Cs for captive insurers launched
Zurich Financial Services Ltd. has launched a product that claims to be a new alternative to letters of credit for the UK's captive insurance companies. Fronting insurance companies such as Zurich have traditionally asked for L/Cs as a form of collateral to secure their credit exposure with captive insurance companies and their parent companies.
With the new product, known as eZ Trust, the captive insurer essentially hands over control of part its investment portfolio to Zurich. Clients prepared to forego control over part of their portfolio will no longer need to raise L/Cs for collateral purposes.
Essentially, the fund itself will act as collateral for captive insurance companies for which Zurich is the fronting insurer. A captive insurance company is an insurer that primarily insures the risks of businesses that are related to it through common ownership.
Nigerian Central Bank demands L/Cs data
The Central Bank of Nigeria (CBN) has ordered all of the country's authorized foreign exchange dealers to submit information and data on L/Cs used to import petroleum products over a five-year period. The CBN order was marked urgent and appears to be associated with suspected irregularities in L/Cs used specifically during the importation of petroleum products.
The order requested information and data on import L/Cs used for petroleum products brought into Nigeria between 2006 and 2011. All of Nigeria's foreign exchange dealers were asked to submit the data and information in both electronic form and hard copy during March. Irregularities regarding import L/Cs for petroleum products have included over-invoicing scams or ghost transactions. These respectively involve shipments that fall short of the amount of product specified on the L/C documentation or consignments that simply never arrive.
Asian credit insurers shift away from L/Cs
Credit insurers in Asia are claiming that a shift away from L/Cs and towards open account trading terms is one factor why credit insurance business is increasing in the region. Asia is increasingly a focus for credit insurers, who have seen demand for their product in mature markets, notably Europe, reduce over the last year. Some insurers, including Marsh China, have reported a significant increase in demand for credit insurance from Asian firms. Atradius has reported a 15 per cent growth in inquiries for insurance in the region in the last quarter. Marsh China says that a particular growth area has been created by an increasing number of Asian exporters wanting to protect their balance sheets against the possibility of default by buyers in the eurozone. Despite the insurers' claims, there is no definitive data to assess the actual rate of growth of credit insurance in Asia.