Laurence,
T.O.’s still in bed, I imagine, and yet my remarks have already brought forth a response.
I used the word ‘debatable’ because I had already used the word ‘questioning’ and therefore did not want to use the word ‘questionable’. That would have been bad form, what what? Nonetheless, I still do not see any contradiction. While I have my own views on this particular discrepancy, I recognise there is scope for alternative views (as, for example, held by the issuing bank) and thus ‘debate’.
For the record, I can say that I would never condone, or actually indulge in, the finding of spurious discrepancies at the behest of an applicant and would expect action to be taken against any member of staff that did. I strongly believe a bank must always honour its obligations, irrespective of its impact on the bank's finances (i.e. a loss) or a particular customer relationship.
As to staff fraud, I was not including this in ‘operational risk’, although I fully recognise it has to be considered when ‘designing’ operational processes and procedures. I was referring to the (essentially non-credit*) risks that arise from the legitimate conduct of doc credit business.
Jeremy
* not in the sense of ‘documentary credit’.
[edited 6/14/02 2:03:44 PM]
Certificate of Origin
Certificate of Origin
Jeremy,
I have got up and after watching the game between Korea and Portugal, I am now ready to kick off and respond to your comments:
1 A valid discrepancy is a discrepancy. An invalid discrepancy is not a discrepancy. There is no direct relationship with the value of the DC. We cannot say that for a small DC, this is not a valid discrepancy but for a big DC, this may be a questionable or debatable discrepancy. Jeremy, as a banker who knows law, your have surprised us with this inconsistency in your comments, as rightly pointed out by Laurence. We share his view too.
2 You have said that a bank faces great risk because big money is being tied up with a DC, then is this a good reason that the document checkers have to armour themselves to protect their banks more, for example, with knowledge of other trade practices and basics on those technologies related to the documents they are checking, for example, BL and insurance policy?
3 You say that bankers have a heavy duty to defend their banks’ money on one hand and on the other hand you refuse to improve banker's skills in document examination. We see this as another inconsistency. If we were a banker, we would do everything to reduce such risk at all costs. Big money is saved and such efforts are worth the while.
4 Responding to your comments on the word “stupid” that we have used, we firstly thought of using the word “ridiculous” but we later considered that the word “stupid” was better to convey our meaning, although in mastering the language English, we are not as good as our friend Hatem. For us “stupid” implies that the document checker may not know what he is doing, due to lack of knowledge about the relative strengths of hand written words v. pre-printed words, a result of inadequate training.
5 To be honest, a lot of bankers also admit to us that they fabricate discrepancies for many reasons, such as (a) to keep the important customers (b) to buy time when the bank is waiting for the final decision of the issuing bank. If the issuing bank pays, the nominated bank pays. Otherwise No. (c) to test the beneficiary’s endurance.
6 A lot of such bankers should be given a yellow card if not the red one as they are the ones who would kill the DC as a reliable payment undertaking from a bank, that is supposed to be impartial and independent.
T. O.
www.tolee.com
[edited 6/14/02 4:39:07 PM]
I have got up and after watching the game between Korea and Portugal, I am now ready to kick off and respond to your comments:
1 A valid discrepancy is a discrepancy. An invalid discrepancy is not a discrepancy. There is no direct relationship with the value of the DC. We cannot say that for a small DC, this is not a valid discrepancy but for a big DC, this may be a questionable or debatable discrepancy. Jeremy, as a banker who knows law, your have surprised us with this inconsistency in your comments, as rightly pointed out by Laurence. We share his view too.
2 You have said that a bank faces great risk because big money is being tied up with a DC, then is this a good reason that the document checkers have to armour themselves to protect their banks more, for example, with knowledge of other trade practices and basics on those technologies related to the documents they are checking, for example, BL and insurance policy?
3 You say that bankers have a heavy duty to defend their banks’ money on one hand and on the other hand you refuse to improve banker's skills in document examination. We see this as another inconsistency. If we were a banker, we would do everything to reduce such risk at all costs. Big money is saved and such efforts are worth the while.
4 Responding to your comments on the word “stupid” that we have used, we firstly thought of using the word “ridiculous” but we later considered that the word “stupid” was better to convey our meaning, although in mastering the language English, we are not as good as our friend Hatem. For us “stupid” implies that the document checker may not know what he is doing, due to lack of knowledge about the relative strengths of hand written words v. pre-printed words, a result of inadequate training.
5 To be honest, a lot of bankers also admit to us that they fabricate discrepancies for many reasons, such as (a) to keep the important customers (b) to buy time when the bank is waiting for the final decision of the issuing bank. If the issuing bank pays, the nominated bank pays. Otherwise No. (c) to test the beneficiary’s endurance.
6 A lot of such bankers should be given a yellow card if not the red one as they are the ones who would kill the DC as a reliable payment undertaking from a bank, that is supposed to be impartial and independent.
T. O.
www.tolee.com
[edited 6/14/02 4:39:07 PM]
Certificate of Origin
T.O.,
Good to see you’re up and about. I trust you enjoyed the match. While I am not a great follower of football, I am pleased to see the impact previously minor (from a football perspective) countries are having on this particular World Cup; if nothing else, it has offered some good opportunities for schadenfreude. I certainly will not be too exercised if England are knocked out tomorrow.
Following you’re numbering:
1. If I have given the impression that I am suggesting the ‘validity’ of a discrepancy varies based on the amount of the credit, then I apologise because this is not my view.
2 - 3. My point is, and always has been, banks are not entitled -in law- to apply such knowledge in determining documents compliance. I appreciate you do not accept this and therefore we shall have to agree to disagree.
4. Noted.
5. I am outraged.
6. I think you’re being far too lenient.
Jeremy
Good to see you’re up and about. I trust you enjoyed the match. While I am not a great follower of football, I am pleased to see the impact previously minor (from a football perspective) countries are having on this particular World Cup; if nothing else, it has offered some good opportunities for schadenfreude. I certainly will not be too exercised if England are knocked out tomorrow.
Following you’re numbering:
1. If I have given the impression that I am suggesting the ‘validity’ of a discrepancy varies based on the amount of the credit, then I apologise because this is not my view.
2 - 3. My point is, and always has been, banks are not entitled -in law- to apply such knowledge in determining documents compliance. I appreciate you do not accept this and therefore we shall have to agree to disagree.
4. Noted.
5. I am outraged.
6. I think you’re being far too lenient.
Jeremy
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Certificate of Origin
I would agree with Jeremy's Yes and No remarks.
In normal circumstances certificate of origin number would not be an issue unless there is strong evidence that chamber of commerce has not added it.
As for different fonts and typing, I would be very cautious in accepting a document issued by a third party that bears such impression. The probability that an addition was made to the document by the beneficiary cannot be discounted. However, it might not be the case and the bank could be sued for wrong dishonor. The document examiner therefore needs to apply article 13 (a) wisely to reach to undisputable decision.
[edited 6/15/02 8:54:04 AM]
In normal circumstances certificate of origin number would not be an issue unless there is strong evidence that chamber of commerce has not added it.
As for different fonts and typing, I would be very cautious in accepting a document issued by a third party that bears such impression. The probability that an addition was made to the document by the beneficiary cannot be discounted. However, it might not be the case and the bank could be sued for wrong dishonor. The document examiner therefore needs to apply article 13 (a) wisely to reach to undisputable decision.
[edited 6/15/02 8:54:04 AM]
Certificate of Origin
BANKERS HAVE NO RESPONSIBILITY TO FIND OUT THE FACTS UNDER UCP 500
To respond to Abdulkader’s comments, when a document checker discovers that the certificate uses different fonts to present a data or message, he should not regard it as a discrepancy, as supported by the recent version of the ISBP draft under reviewed. According to the UCP 500 he needs not have to find out whether the certificate is 100% genuine or not, or whether the beneficiary has added anything on that data or message. This is very clear.
BANKERS HAVE THE NEED TO FIND OUT THE FACTS UNDER RISK MANAGEMENT PERSPECTIVES
However, DC operation does not only involve UCP 500. As Jeremy has said, it involves big money and the issuing bank is exposed to great risk if there is a fraud. Hence, from risk management point of view, the issuing bank should try to approach the issuer of the certificate and find out the facts. If a fraud is ascertained, then the issuing bank can notify the applicant who will apply for the injunction (in Common Law countries) or court order to stop payment (in Civil Law countries). It is better to let the applicant do this job in order to respect the UCP 500 independence or “document examination solely based on documents” principle.
A BANKER WITH TWO HATS SHOULD CHOOSE WHICH HAT IS MORE SUITABLE FOR HIM
In a world frequented by trade frauds, bankers have to be flexible in order to survive. In Asia, banks would find out the fact with a telephone or fax to the shipping companies to check whether the suspicious BsL are genuine or not. It works fine.
NEGOTIATING BANKS HAVE TO ACT WITH REASONABLE CARE
If the negotiating banks are not careful and have missed out the rather obvious indicators of frauds, they may not be able to get reimbursed due to lack of reasonable care or due diligence in examination of documents, as required under UCP 500 Article 13. At the same time they cannot rely on the enviable position of “holder in good faith” of the drafts due to their failure to act with reasonable care and detect such discrepancies. Knowledge of the basics about maritime transport and chartering would then be an advantage in fighting crimes. We have handled a lot of such cases in recent years.
FRAUDSTERS DO MAKE SILLY MISTAKES IN FAKE DOCUMENTS, SUCH AS BL
Fraudsters are not well trained in the basics of maritime transport, chartering, insurance, Incoterms 2000 and other trades/subjects related to DC operations. Hence they make a lot of silly and careless mistakes in the BL, policy and other documents, that could be easily detected if the bankers only knew a little bit more about the basics of these related trades/subjects.
We make this comment from our past experience in dealing with fraudulent documents which have passed the gates guarded by the document checkers. In our DC frauds prevention workshops, we use these actual documents as case studies. One example has already been highlighted by Captain M (a brother of Mr. M in James Bond's office?) from ICC Commercial Crime Bureau in the DCI. The container numbers are missing for containerised shipments.
www.tolee.com
[edited 6/16/02 7:58:52 PM]
To respond to Abdulkader’s comments, when a document checker discovers that the certificate uses different fonts to present a data or message, he should not regard it as a discrepancy, as supported by the recent version of the ISBP draft under reviewed. According to the UCP 500 he needs not have to find out whether the certificate is 100% genuine or not, or whether the beneficiary has added anything on that data or message. This is very clear.
BANKERS HAVE THE NEED TO FIND OUT THE FACTS UNDER RISK MANAGEMENT PERSPECTIVES
However, DC operation does not only involve UCP 500. As Jeremy has said, it involves big money and the issuing bank is exposed to great risk if there is a fraud. Hence, from risk management point of view, the issuing bank should try to approach the issuer of the certificate and find out the facts. If a fraud is ascertained, then the issuing bank can notify the applicant who will apply for the injunction (in Common Law countries) or court order to stop payment (in Civil Law countries). It is better to let the applicant do this job in order to respect the UCP 500 independence or “document examination solely based on documents” principle.
A BANKER WITH TWO HATS SHOULD CHOOSE WHICH HAT IS MORE SUITABLE FOR HIM
In a world frequented by trade frauds, bankers have to be flexible in order to survive. In Asia, banks would find out the fact with a telephone or fax to the shipping companies to check whether the suspicious BsL are genuine or not. It works fine.
NEGOTIATING BANKS HAVE TO ACT WITH REASONABLE CARE
If the negotiating banks are not careful and have missed out the rather obvious indicators of frauds, they may not be able to get reimbursed due to lack of reasonable care or due diligence in examination of documents, as required under UCP 500 Article 13. At the same time they cannot rely on the enviable position of “holder in good faith” of the drafts due to their failure to act with reasonable care and detect such discrepancies. Knowledge of the basics about maritime transport and chartering would then be an advantage in fighting crimes. We have handled a lot of such cases in recent years.
FRAUDSTERS DO MAKE SILLY MISTAKES IN FAKE DOCUMENTS, SUCH AS BL
Fraudsters are not well trained in the basics of maritime transport, chartering, insurance, Incoterms 2000 and other trades/subjects related to DC operations. Hence they make a lot of silly and careless mistakes in the BL, policy and other documents, that could be easily detected if the bankers only knew a little bit more about the basics of these related trades/subjects.
We make this comment from our past experience in dealing with fraudulent documents which have passed the gates guarded by the document checkers. In our DC frauds prevention workshops, we use these actual documents as case studies. One example has already been highlighted by Captain M (a brother of Mr. M in James Bond's office?) from ICC Commercial Crime Bureau in the DCI. The container numbers are missing for containerised shipments.
www.tolee.com
[edited 6/16/02 7:58:52 PM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Certificate of Origin
I note that Jeremy is outraged at the suggestion that banks sometimes fabricate discrepancies. To quote Christine Keeler "Well he would say that, wouldn't he ?", meaning that he, like any banker in his position, could not publicly admit to such actions whether or not he is aware of them in his own bank.
When one considers Chamber of Commerce certs. of origin which have been legalised, typically this would involve one or more handwritten endorsements and possibly reference nos., dates etc. I do not think anybody would argue that these handwritten additions could be considered as discrepancies, even though it is apparent that they are not added by either the beneficiary nor Chamber of Commerce. In fact, where DCs require them, the absence of such additions to certs. of origin would signify discrepancies.
Laurence
When one considers Chamber of Commerce certs. of origin which have been legalised, typically this would involve one or more handwritten endorsements and possibly reference nos., dates etc. I do not think anybody would argue that these handwritten additions could be considered as discrepancies, even though it is apparent that they are not added by either the beneficiary nor Chamber of Commerce. In fact, where DCs require them, the absence of such additions to certs. of origin would signify discrepancies.
Laurence
Certificate of Origin
Laurence,
I could see some taking your first paragraph as calling into question the honesty of the views I have expressed. However, I am sure this cannot be what you intended and therefore will not interpret it this way. For the avoidance of doubt, however, I wish to emphasise that my opinions on the subject of knowingly raising spurious discrepancies are genuine.
This is not only a question of honesty and good faith, but business sense as well. The value of a bank’s undertaking in the international market place could be severely undermined if it came out (for example in the course of litigation through the ‘discovery’ or ‘disclosure’ process) that it had knowingly raised spurious discrepancies. The damage could far exceed the value of any individual customer relationship/capital loss to the bank. ‘Reputational risk’ is something which should be very much in the forefront of modern bankers’ minds.
Jeremy
[edited 6/17/02 1:08:11 PM]
I could see some taking your first paragraph as calling into question the honesty of the views I have expressed. However, I am sure this cannot be what you intended and therefore will not interpret it this way. For the avoidance of doubt, however, I wish to emphasise that my opinions on the subject of knowingly raising spurious discrepancies are genuine.
This is not only a question of honesty and good faith, but business sense as well. The value of a bank’s undertaking in the international market place could be severely undermined if it came out (for example in the course of litigation through the ‘discovery’ or ‘disclosure’ process) that it had knowingly raised spurious discrepancies. The damage could far exceed the value of any individual customer relationship/capital loss to the bank. ‘Reputational risk’ is something which should be very much in the forefront of modern bankers’ minds.
Jeremy
[edited 6/17/02 1:08:11 PM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Certificate of Origin
Jeremy,
far from questioning the honesty of your views, my point was quite the opposite, although having re-read it I agree with you that it could have been misinterpreted. What I intended to say was that if you became aware of such practices, normal confidentiality rules within your bank may prevent you from making any affirmation of such officially. This is part of the difficulty. I do not expect any bank to publicly admit that it goes on. This leads to the practice being viewed with "Nelson's eye".
Laurence
far from questioning the honesty of your views, my point was quite the opposite, although having re-read it I agree with you that it could have been misinterpreted. What I intended to say was that if you became aware of such practices, normal confidentiality rules within your bank may prevent you from making any affirmation of such officially. This is part of the difficulty. I do not expect any bank to publicly admit that it goes on. This leads to the practice being viewed with "Nelson's eye".
Laurence
Certificate of Origin
Laurence,
Understood.
Jeremy
[edited 6/17/02 4:48:19 PM]
Understood.
Jeremy
[edited 6/17/02 4:48:19 PM]
Certificate of Origin
FABRICATION OF DISCREPANCIES IS AN INTERNATIONAL STANDARD BANKING MALPRACTICE
From the feedbacks by some honest bankers, such as in a quiet corner during the coffee breaks amidst a workshop, at least in certain parts of the world, fabrication of discrepancies is becoming an international standard banking malpractice. Some bankers complaint to us (of course we cannot tell you their names) that they cannot refuse the power applicants' request to delay payment by fabricating discrepancies – sometimes to buy time, sometimes to negotiate a better discount, sometimes to avoid payment altogether if the price of the commodity drops drastically upon arrival. This is a real life situation and a problem that bankers have to face in the competitive DC market around the world, whether one likes it or not. One honest banker told us that he couldn’t lose his job when unemployment was 8% plus in his country. This is life.
THERE ARE CERTAIN THINGS THAT WE CANNOT DO
As we are not bankers, we are freer to admit this. If you ask a banker publicly, he or she can never give you the true answer, as he or she is barred from his or her own bank to admit this publicly, as already pointed out by Laurence.
As a consultant, we sometimes receive enquiries to fabricate discrepancies too. We never accept such assignment. As a Buddhist, there are certain things that we cannot do, whether or not they are restricted by law. We are very fortunate that we can choose our customers. To certain companies, this is not easy to achieve unless survival is not a concern.
www.tolee.com
[edited 6/17/02 4:58:59 PM]
From the feedbacks by some honest bankers, such as in a quiet corner during the coffee breaks amidst a workshop, at least in certain parts of the world, fabrication of discrepancies is becoming an international standard banking malpractice. Some bankers complaint to us (of course we cannot tell you their names) that they cannot refuse the power applicants' request to delay payment by fabricating discrepancies – sometimes to buy time, sometimes to negotiate a better discount, sometimes to avoid payment altogether if the price of the commodity drops drastically upon arrival. This is a real life situation and a problem that bankers have to face in the competitive DC market around the world, whether one likes it or not. One honest banker told us that he couldn’t lose his job when unemployment was 8% plus in his country. This is life.
THERE ARE CERTAIN THINGS THAT WE CANNOT DO
As we are not bankers, we are freer to admit this. If you ask a banker publicly, he or she can never give you the true answer, as he or she is barred from his or her own bank to admit this publicly, as already pointed out by Laurence.
As a consultant, we sometimes receive enquiries to fabricate discrepancies too. We never accept such assignment. As a Buddhist, there are certain things that we cannot do, whether or not they are restricted by law. We are very fortunate that we can choose our customers. To certain companies, this is not easy to achieve unless survival is not a concern.
www.tolee.com
[edited 6/17/02 4:58:59 PM]