ICC Digital Library Forum

Notwithstanding Article 38 of UCP 600, can the issuing bank specify that any bank can transfer the credit ?

Hi,

Why not? I think if the issuing bank states in the credit that any bank can transfer the credit, then any bank is a nominated transfering bank.

Regards,
N.H.Duc

I do not believe that any issuer would allow this amendment/statement. You need one bank to control the transfer process to help in preventing beneficiary fraud and other less severe mistakes.

Glenne,

I just mean that it is quite possible if the issuer states so in the credit.

You are right. But could you please give some examples about the possibilities of fraud that the beneficiary may commit?

Thank you.
N.H.Duc


[edited 3/20/2010 3:06:56 AM]

Hi N. H.,
You could allow multiple transferring banks but the real question is should you? With multiple transferring banks allowed, the beneficiary could possibly go to a variety of banks and request full or partial transfers to others and/or to shell companies of their own creation. They could then request honour or negotiation for each simultaneously. While it is not suppose to happen, there is a likelihood of possible success. Also, if a beneficiary did transfer in full to two or more companies that shipped the goods in good faith, those second beneficiary’s would generally have recourse to either or both the transferring and issuing banks. It is a truly unnecessary risk to have multiple transferring banks. The rule of one LC, one transferring bank is created for good reasons and is meant to provide protections and it should be complied with.

In a nut shell, as we Britons say, it is theoretically possibly but any issuing bank that agrees to this is taking a very big risk indeed.