Analysing The Menace Of Letter Of Credit Fraud
- IJLLR Journal
- Mar 28
- 1 min read
Labhanshi & Sanvi Singh, Christ University
ABSTRACT
The paper has investigated and looked into theoretical facet of Letters of Credits (LCs) and its pivotal portrayal in international trade, Finance and Fintech. LCs is used in the process of a guarantee that is issued by banks to assure safe payments between buyers and sellers, therefore reducing risks in cross-border transactions. The analysis has brought out the parties who are involved like buyers, sellers, and banks, and importance of strict compliance with LC terms and conditions which are made. It also looks out the frauds that are happening, with real life case like the Punjab National Bank scam, where loopholes in the system are portrayed. Fraudulent practices, including document manipulation and collusion, are common risks that require robust preventive measures.
The document discloses how technology, FinTech innovations as AI, blockchain, and digital KYC, are now transforming trade finance. It detects fraud, improves transparency, and makes global transactions faster and safer. However, there are still challenges in the form of regulatory gaps and security concerns. Regulatory framework, the encouragement of electronic documentation, and international collaboration to fight fraud. The paper has emphasized the modernization of the trade system which is being done by technology for building trust, ensuring smoother and more secure international trade practices between the parties.
Keywords: Letters of Credits (LCs), International Trade and role of LCs, Fraud in Trade Finance, FinTech and LCs, Punjab National Bank Scam, Role of LCs in Banking Sector, Causes of LC Fraud, Blockchain Technology, Artificial Intelligence (AI), Know your Customer (KYC), UCP600, Regulatory Frameworks, Cross-border Transactions, Types of Frauds, Risk Mitigation in Trade, Building Awareness.
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