Trade finance houses may need to adopt a more rigorous approach to checking the veracity of letters of credit (L/Cs) in the wake of last week's devastating attacks on New York and Washington.

Security experts believe that L/Cs could well have been a component in the financing mechanism that enabled the perpetrators to carry out the attacks and ironically, one expert on transnational crime has suggested that the world's major financial centres play a central role in financing terrorist campaigns.

Withdrawals through major banks

Speaking to the Reuters news agency, John McFarlane of the Strategic and Defence Studies Centre of the Australian National University, said London, Zurich and even New York itself were the most likely places for putting in place funds that could be easily drawn by international terrorists working anywhere in the world.

Experts in money laundering have consistently held that illegal operations may use standby L/Cs to distribute funds legitimately through major banks throughout the world. The L/Cs would they say be fraudulently based on spurious transactions and would be set up using difficult to trace invoices and shipping documents.

While the 11 September attacks cost very little to stage, future terrorist offensives may be financially more sophisticated. The trade finance community may yet have an active role to play in the seemingly inevitable war against terrorism.

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