UniCredit SpA has sued Hin Leong Trading Pte Ltd over a letter of credit (L/C) that the collapsed Singapore oil trader obtained ostensibly to purchase oil but instead used to settle debts.

The Italian bank is also suing Glencore over the same matter while several banks have reportedly experienced similar issues with fraudulently obtained L/Cs.

Simultaneous sell back

According to Singapore High Court documents, Hin Leong asked UniCredit to finance a shipment of fuel oil from Glencore for US$37.2 million under a US$85 million credit line extended to Hin Leong in November 2019.

What Unicredit said it did not know at the time it provided the L/C was that Hin Leong had made a separate agreement to sell the cargo straight back to Glencore on the same day according to the court documents.

Bank unaware

Unicredit said it did not learn about the agreement to resell the shipment to Glencore until it was told in June 2020 by PwC, Hin Leong's judicial manager.

Earlier this year PwC said there were deals involving at least 18 L/Cs worth about US$503 million opened by Hin Leong to purchase cargoes that were immediately sold back to the seller.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.