Fraud Detection and Prevention in Trade Finance
Combating Organized Commercial Crime
A. Fraud is the most destructive illegal act banks face. Not only does it
constitute a direct cost to the bank, it also entails large expenses for legal pursuits, investigation fees and cost of executives' time spent on handling fraudulent transactions. Furthermore, fraud has devastating negative effects, that can't be expressed in terms of money, on the bank's reputation, public trust and staff morale.
B. On 19August 1999, the Bank of New York (BONY), one of America's oldest, admitted to cooperating with an investigation into alleged money-laundering of as much as $10 billion. The paper-trail has touched several European banks too, all of which are said to have helped, over the past year, to move $4 billion from Russia to BONY's London office. As much as $200m that passed through BONY may have come from IMF loans to Russia.
C. The most common type of fraud is the commercial fraud. In some countries, banks incur billions of dollars every year in fraudulent LCs. In 2001, Saudi Arabia alone suffered a loss of over 4 billion dollars worth of fraudulent trade finance transactions.
D. The Commercial Crime Bureau of the ICC in Paris announced that the estimated volume of fraudulent standby letters of credit transactions alone exceeded $10 million a day.The Course Objectives
1. To realize the severe destructive effects of fraud, weather conducted as an organized crime or as separate incidents, and to be aware of the necessity to combating fraud.
2. To understand the importance of the sound application of the bank’s policies and internal regulation in detecting and preventing fraud.
3. To understand the ways by which commercial fraud takes place.
4. To become acquainted of the various methods adopted in detecting and preventing commercial fraud.Topics Covered:-
A. Background and History – Fraud in Banking
B. Treatment of Fraud in the UCP600 and ISP98
C. The Independence Principle and the Doctrine of Fraud
D. The Proper Structuring of Import LCs
E. Sound Perusing of the Terms and Conditions of Export LCs
F. There is no Easy Money:- Standby Letters of Credit, Prime Bank
Guarantees, Financial Instruments, Safekeeping Receipts, Back - to – Back
Letters of Credit, Transferable Letters of Credit, Currency Scams, Lost
Treasures, Gold Deals, Huge Inheritances, Shell/Bogus Banks and Funny
Money.
G. Procedures for Preventing Commercial Fraud.
Venue: Ordering Bank’s Training Center
Terms: Minimum Number of Trainees per Course is 15
Duration: 16 Training Hours given over a Period of 4 days
Trainees: Trade Finance Practitioners, Credit Executives/Officers, Senior/Junior Auditors and Compliance Staff.
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