Banking & finance

FIB fraud warning prevents huge losses

  • 19 December 2005

A company based in China has saved hundreds of thousands of dollars by heeding a financial fraud warning recently posted on the ICC Financial Investigation Bureau’s (FIB) website

The London based FIB’s warning advised members of the business community to be on guard for fraudsters attempting to use a fictitious financial instrument entitled ‘London Short Form 3034’.

In the midst of a deal involving a $50 million dollar loan, the Chinese enterprise was carefully reviewing the documents involved and found them to be suspicious. Recalling the FIB’s advice, they contacted the investigative bureau and forwarded the documents to London for expert analysis.

Commenting on the case, FIB Assistant Director Jon Merrett said: “The documents we reviewed on behalf on this particular Chinese company were riddled with terms and language common to operators of financial fraud, including the non-existent London Short Form 3034.”

The deal in question involved a Confidential Loan Contract using a Standby Letter of Credit as collateral for a period of one year. 2.5% of the loan amount was to be paid up front. The company was also required to sign a non-disclosure contract, and provide other documentation including a promissory note, details of its bank accounts, profit and loss statements, and copies of its business licence.The FIB publication ‘Preventing Financial Instrument Fraud’, a popular reference guide for those hoping to avoid becoming victims of financial fraud, makes it clear that Standby Letters of Credit are not mechanisms for borrowing money.

Mr Merrett added: “Providing detailed banking information of this nature to an experienced perpetrator of financial fraud can prove very dangerous. It is our assumption that a group of fraudsters operating out of the United States may be targeting Chinese companies using the non-existent London Short Form 3034 linked to a Standby Letter of Credit and other supporting documentation. We do not know if other Chinese companies have been contacted by this lender and would be interested to hear from any that might currently be engaged in financing a loan under similar circumstances.”

As this type of fraud operation frequently looks far and wide for unsuspecting victims, the FIB is issuing a general warning asking the business community to be alert to offers of loans being financed this way, and to be on guard if large sums of money are required to be paid in advance.