The repertoire of frauds involving letters of credit (L/Cs) is large but in some financial scams, it can be the very absence of an L/C that allows fraudsters to make away with cash from their victims.

Such a scenario is highlighted in charges recently brought against five men by the Florida Department of Law Enforcement in a loan scheme that allegedly defrauded victims out of more than US$1.1-million.

Business expansion

According to investigators the victims were mostly representatives of small- and medium-sized companies looking to expand their businesses with loans ranging from US$8 million to US$25 million.

The alleged fraudsters used false but apparently convincing documentation to persuade the company representatives that they could obtain loans for them through financial institutions.

The victims were asked by the alleged fraudsters to pay application fees of between US$15,000-US$30,000 in order to secure loans that in fact never materialised.

Escrow account

When applications were accepted, the victims were apparently required to pay deposits, sometimes amounting to more than US$200,000 into an escrow account opened against their supposed loan funding.

The escrow accounts should not have been used until L/Cs were secured but according to investigators, the accounts were usually emptied within one or two days by the alleged fraudsters.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.