Banks and industrial and trade companies should work closely together and take effective measures to avoid or reduce the occurrence of documentary credit fraud. The following preventive measures can be taken.
(1) The exporter’s bank (referring to the notifying bank) must carefully and responsibly verify the authenticity of the letter of credit and understand the credit status of the issuing bank. For letters of credit issued by mail, the seal should be carefully checked to see if it matches. For large-value letters of credit, the issuing bank should also be required to add a pledge for confirmation. For letters of credit issued by telex and their amendments, the seal should be checked in a timely manner to see if it matches to prevent counterfeiting and forgery. At the same time, the name, address and credit status of the issuing bank should be compared and analyzed with the bank yearbook. If any doubts are found, the issuing bank or the agent bank should be immediately inquired to ensure the authenticity, legality and reliability of the letter of credit.
(2) Exporters must carefully choose their trading partners. When looking for trading partners and trade opportunities, they should try to contact and understand customers through formal channels (such as participating in the Canton Fair and field visits) and do not do business with customers with unknown or poor credit. Before signing a contract, you should try to entrust a relevant consulting agency to conduct a credit investigation on the client so that you have a clear idea in mind and can make the right choice to avoid choosing the wrong trading partner and suffering the consequences.
(3) Both banks and export companies need to carefully review letters of credit. While banks focus on the letters of credit, they should also pay attention to the validity and risk of the letters of credit. Once it is discovered that the letter of credit contains “soft clauses”, “trap clauses” and other unfavorable clauses that do not put the initiative in their hands, they must resolutely and quickly contact the customer to modify it, or take corresponding preventive measures to prevent it from happening.
(4) When export companies or industrial and trade companies sign contracts with foreign businessmen, they should establish contract terms in an equal, reasonable and prudent manner, and eliminate unequal and unreasonable terms that are detrimental to their interests, such as advance performance bonds, warranty bonds, commissions and agency fees, so as to avoid falling into the other party’s trap and wasting money and energy.