Letters of Credit

• Shell companies portraying themselves as import/export ventures obtain letters of credit to add credibility to cross-border transactions.
• Criminals submit fraudulent or inflated shipping documents, allowing them to claim and disburse funds supposedly tied to legitimate overseas trade.
• The formal nature of letters of credit conceals irregularities, making it harder for financial institutions to detect underlying trade-based laundering.

• Falsified invoices underpinning letters of credit enable criminals to draw inflated sums, disguising illicit proceeds as ‘legitimate’ trade payments.
• Multiple invoicing exploits involve repeated or modified documentation for the same shipment, allowing repeated draws on letters of credit to launder funds.

Criminals seek multiple letters of credit from different financial institutions using the same invoice and accompanying trade documents. Each bank assumes it is guaranteeing payment for a separate transaction. The legitimizing effect of a letter of credit conceals that the goods or services are actually financed multiple times under the same shipment, layering illicit funds behind seemingly normal trade finance.

• Criminals embed inflated costs in documentation attached to letters of credit, compelling banks to honor payments exceeding the actual value of goods or services.
• The overpayment appears legitimate since letters of credit inherently carry banking assurance, enabling criminals to launder excess amounts once the letter is settled.
• The structured nature of letters of credit helps mask artificially high pricing under formal trade finance procedures.

• Criminals submit fictitious or inflated shipping and commercial documents to trigger payment under a letter of credit, effectively laundering illicit funds behind seemingly legitimate trade.
• Overstated or nonexistent goods are nevertheless paid for by the issuing bank, embedding unlawful proceeds within cross-border trade finance transactions.

• Forged shipping and export documents (e.g., bills of lading) are submitted to trigger payments under letters of credit.
• By misrepresenting the nature, value, or existence of shipped goods, criminals legitimize cross-border fund movements and obscure illicit origins.

Criminals submit falsified shipping documents, such as forged bills of lading or altered product details, to meet the documentary requirements under letters of credit. This action triggers disbursements for supposed exports or imports that do not correspond to actual goods or services, effectively laundering illicit funds. The reliance on paper or electronic documentation, rather than in-person inspections, complicates the ability of financial institutions to detect discrepancies across multiple jurisdictions.

• Trade diversion exploits letters of credit by presenting falsified shipping and cargo documents to financial institutions, triggering payments for what appear to be legitimate shipments.
• Because banks rely heavily on documentation, the real origin, destination, or value of goods remains obscured, aiding in layering illicit proceeds.

• Fraudulent or duplicated letters of credit enable repeated transfers under the guise of international trade, even if no real shipment occurs.
• Criminals exploit the appearance of legitimate trade finance to cycle funds between shell companies, obscuring illicit capital flows.

• Criminals request letters of credit under fictitious trade deals, portraying the funds as payments for goods that never change hands.
• The misrepresented purpose (e.g., 'import of electronics') creates a veneer of genuine commercial activity, enabling them to move illicit proceeds under false pretenses.

• Criminals secure letters of credit for international shipments but provide fraudulent or inflated documentation that conceals smuggled goods.
• The bank’s disbursement of funds upon presentation of documents layers illicit proceeds behind formal trade processes.
• By leveraging official banking channels and trade finance protocols, smugglers obscure the true origin of contraband proceeds.

• Forged shipping and customs documents for inflated diamond shipments secure letters of credit at inflated amounts.
• The guaranteed payment structure of letters of credit legitimizes large trades, helping criminals inject illicit funds into the financial system under the guise of legitimate diamond exports.
• Layering occurs as funds move through multiple banks honoring these inflated letters of credit.

• Shell companies secure letters of credit for the purported import/export of environmental commodities, masking irregularities in product origin or valuation.
• Banks often focus on document compliance rather than substance, enabling criminals to layer illicit proceeds under the guise of trade finance.
• The cross-jurisdictional use of letters of credit adds further transactional complexity, hindering AML tracing.

• Criminals submit forged shipping documents (e.g., falsified bills of lading and invoices) to meet the documentary requirements of a letter of credit.
• Once these fraudulent papers appear to satisfy the bank's conditions, funds are released, facilitating the layering of illicit proceeds under the pretense of legitimate trade transactions.
• The reliance on documentary checks makes letters of credit vulnerable to manipulated shipping records that are challenging to validate across complex supply chains.

• Criminals submit forged bills of lading or other shipping documents to fulfill the conditions of letters of credit, securing bank-guaranteed payments for goods that do not exist.
• The traditional reliance on documentary compliance in letters of credit masks the absence of any real shipment.
• By leveraging multiple jurisdictions with inconsistent AML oversight, they obscure the fraudulent nature of the transaction.

• Fraudsters submit fraudulent bills of lading and shipping records as proof of goods shipped under a letter of credit.
• Once the documentary conditions are ostensibly met, banks disburse funds, effectively laundering illicit money under the guise of legitimate trade finance.
• Reusing or duplicating falsified documents in multiple letter-of-credit drawdowns further obscures the paper trail, complicating accurate fund tracing.

• Criminals establish multiple letters of credit across shell companies, each referencing another with minimal or no real goods behind them.
• Funds circulate through these interlinked letters of credit, making each transaction appear legitimate in isolation while concealing the closed-loop nature.
• This layering technique exploits the fact that each issuing or confirming bank sees only a segment of the transaction chain, reducing scrutiny of the overall fraudulent scheme.

• Offenders forge or exaggerate letters of credit, triggering payments for phantom or inflated shipments.
• Advanced-payment clauses (e.g., red/green clause LCs) are exploited by inflating pre-shipment costs, allowing the diversion of funds before any real trade occurs.
• Collusive entities present counterfeit documentation to financial institutions, causing payments to be honored under false pretenses of international trade.

• Criminals misuse red/green clause letters of credit to secure large partial or advance payments by presenting falsified or exaggerated shipping and production documentation.
• These documents trigger bank-issued funds before goods are actually shipped—or in volumes not truly matching the paperwork—thereby masking the real source of illicit proceeds.
• By routing these advanced payments through various intermediaries or shell entities, offenders layer and obscure the funds within legitimate-seeming trade flows.

• Criminals misuse letters of credit by inflating or forging supporting documents to trigger guaranteed payments under the guise of legitimate trade.
• When used in reciprocal bartering arrangements, launderers can obscure or overstate shipped goods to layer illicit proceeds seamlessly among trade partners.
• This arrangement leverages bank guarantees to move funds across borders with minimal scrutiny of the underlying commodity exchange.

• With direct influence over compliance, criminals authorize the issuance or acceptance of letters of credit without verifying the underlying trade documents.
• This facilitates cross-border layering by masking illicit funds as legitimate international trade payments.
• Corrupted managers can ignore trade discrepancies and fraudulent documentation, disguising criminal proceeds as normal commercial activity.

• Fraudsters present letters of credit supported by inflated or forged shipping documents, masking overvalued or nonexistent goods.
• Once the bank’s payment guarantee is triggered, criminals receive illicit proceeds disguised as standard trade settlements.
• By manipulating documentation requirements, they obscure discrepancies between actual and invoiced cargo, embedding illicit capital in legitimate commercial channels.

• Criminals present falsified or manipulated shipping documents (e.g., bills of lading) to obtain letters of credit for over- or under-invoiced oil/fuel shipments.
• Financial institutions unwittingly guarantee payment based on these doctored documents, thereby channeling illicit funds under the appearance of legitimate trade finance.
• The structured nature of letters of credit, which rely on documentation rather than the actual shipment’s authenticity, enables large-scale laundering operations through misleading oil trade records.

• Illicit actors frequently amend letters of credit to conceal sudden changes in shipping routes, commodity volume, or type, without a justifiable commercial reason.
• These alterations hinder banks' ability to confirm legitimate trade flows, enabling criminals to layer illicit proceeds under the guise of routine international transactions.

• Fraudsters alter core information (e.g., reference numbers, shipment details, or beneficiary data) on genuine letters of credit or create entirely forged ones.
• By exploiting the trust and guarantee these instruments provide in trade finance, criminals mask the true nature of the underlying transactions.
• This falsification hinders standard due diligence checks, allowing illicit funds to move through ostensibly legitimate trade channels.

• Criminals embed distorted prices within letters of credit for inter-company trade, enabling the systematic misreporting of value in cross-border shipments.
• Because letters of credit are widely accepted as secure trade tools, manipulated pricing details appear conventional yet effectively funnel illicit funds.
• The structured payment terms mask inflated or under-declared amounts, hindering detection by financial institutions and regulators accustomed to routine trade documentation.

• Malicious actors exploit letters of credit in cross-border trade to finance transactions involving sanctioned goods or entities.
• Adjustments or misrepresentations of beneficiary details in these letters enable funds to move under the guise of legitimate commercial activity, bypassing scrutiny.

• Criminals use letters of credit to finance purchases or sales of counterfeit merchandise under the pretense of legitimate trade.
• Falsified shipping documents and invoices convince banks to guarantee payments, creating a veneer of lawful transactions.
• Once issued, the letter of credit transfers funds in a manner that appears compliant with trade requirements, thereby laundering proceeds derived from counterfeit operations.

• Criminals submit seemingly valid trade documents indicating benign goods instead of arms, prompting banks to release payments guaranteed by letters of credit.
• This process legitimizes funds linked to arms transactions, bypassing detection as the bank’s role focuses on document compliance rather than cargo inspection.

• Fraudsters submit forged or overstated shipping documents and invoices to obtain letters of credit for goods that may not exist or are artificially inflated.
• Once the letter of credit is issued, criminals extract the funds, effectively transforming fraudulent financing into ostensibly legitimate capital.
• This tactic leverages the trust-based nature of trade finance, where banks rely on documentation that fraudsters skillfully falsify.

• Criminals obtain letters of credit to guarantee payment among suspiciously interconnected entities, indicating supposedly legitimate cross-border deals.
• This formal banking instrument adds credibility to repetitive import-export transactions, reducing scrutiny and enabling VAT refunds on sham trades.
• The same or similar goods can cycle through multiple shell companies, all backed by letters of credit that give an appearance of genuine risk mitigation for normal trade.

• Criminals present forged shipping documents or misrepresent cargo specifications (e.g., actual volumes of illegally sourced timber) to trigger letter-of-credit payments.
• By appearing to fulfill legitimate international trade deals, they secure disbursements from banks, effectively blending illegal proceeds with lawful transactions.
• This exploitation of standard trade finance processes obscures the true source of funds, hindering straightforward AML detection.

• Criminals secure letters of credit for timber exports by presenting forged or misleading documentation to appear compliant with legitimate trade requirements.
• The guaranteed payment structure of letters of credit provides an appearance of legitimacy, enabling illegal logs to move across borders disguised as lawful shipments.
• This setup allows funds derived from unauthorized timber to enter the financial system as seemingly valid proceeds from international trade.

• Exporters submit inflated shipping and invoice documentation to trigger letters of credit at amounts well above legitimate product values.
• The issuing bank releases payments aligned with the inflated figures, believing they reflect genuine trade terms.
• The surplus constitutes laundered proceeds, transferred under the guise of legitimate trade finance settlements.