Product whereby the bank issues an authenticated undertaking that represents a commitment to pay a beneficiary a specified amount of money against documents presented that comply with the terms and conditions of the letter of credit.
Inherent Risk Rating:
High
Risk Indicators:
Can be used to make direct or indirect payment to sanctioned target or country
Can be used to pay Public Official
Concealed source of payment
Product being financed requires an export license
Can be used to finance goods which could be subject to trade embargoes
Product can be used to finance shipment of goods using a vessel with flags of convenience
High value or unlimited value payment
No jurisdictional restrictions
Payments from banks in medium or high risk countries
Payments to 3rd Parties
Placement of Collateral
Transfer through jurisdictions with ineffective sanctions enforcement
Possible mitigation controls:
Approval to make 3rd Party Payment
Collateral or payment terms and timeframes defined in agreement or contract
Documentary Evidence to identity parties and details of transaction