The transaction, involving Russian and United Arab Emirates (UAE) companies, was referred to the Bureau by a member bank who understood it was from an established client. The deal was initially referred to the FIB because it involved a high-risk financial instrument. It was later found that the parties concerned did not appear to be established traders and that components of the financial mechanism had serious flaws.
FIB Assistant Director John Lavers commented: “Suspicions were initially raised over this transaction because it involved a Revolving Letter of Credit, a high-risk financial instrument. Whilst this is a useable financial instrument, in the current climate we urge member banks to treat it with due care and diligence. We also noted that the proposed profit margin on this particular transaction was significantly higher than what we have seen in recent, similar transactions.”
The Bureau quickly identified a number of ‘red flag’ terms in the documentation that are not seen in authentic transactions. Additionally, the documentation that was purportedly from one of the bank’s well-known clients, a Russian oil giant, was found to contain a number of typing errors and contact details that did not match the organisation’s genuine contact details.
The transaction also featured an intermediary bank, based in Switzerland. The FIB was able to quickly identify this bank as an institution that is exclusively concerned with individual wealth management rather than trade finance. Furthermore, the Swiss bank was found to have no correspondent banking relation in the UAE.
Mr Lavers continued: “Whilst we do not know for sure that this is a fraudulent transaction, we were able to advise our member of a number of features that we regard as suspicious. Our member was made aware of the questionable features of an apparently lucrative transaction and our advice hopefully saved it from becoming embroiled in any possible criminal activity.”
The FIB urges the banking community to undertake rigorous checks on all transactions and customers, whether or not they are known. This is particularly important in trades concerning those commodities whose prices are at a high and have a controlled supply.