Home Mr Old Man A DOCUMENTARY COLLECTION CASE: FRAUD OR NOT?

A DOCUMENTARY COLLECTION CASE: FRAUD OR NOT?

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QUESTION

Dear Mr. Old Man,

I need your opinion regarding outward collection D/P.

At the request of the principal/drawer we sent a set of documents under D/P to Bank X Branch 001, Long Street Country Y by courier service.

Since receiving no payment, we contacted Bank X to check on the status of the documents was informed by Bank X that they had not received the documents and that the one signing and received the documents was not their staff while the courier service affirmed that it had delivered the documents to the correct address as provided. The drawer checked with the carrier and found that drawee has taken up the documents and received the goods.

When we received the collection instructions from the drawer, we did not check if the address is that of the collecting bank. Should we be responsible for the payment?
Who’s the party that is responsible for this matter or payment?

What’s the best action that should be taken by the remitting bank?

Thank you.
————-

ANSWER

Hi,

According to the information provided the drawee received the documents and took delivery of the goods whereas the collecting bank confirmed that it did not receive the documents for collection.

This could be a fraud where the drawee on purpose provided the drawer with his office’s address instead of the collecting bank’s address so that the courier delivered the documents to the drawee instead of the collecting bank.

The drawer should contact the carrier to determine if the goods were delivered to the drawee against the bill of lading. If so, the drawer should urge the drawee to pay otherwise the drawer could sue the drawee for fraud.

The remitting bank that properly acted in accordance with the principal’s instructions is free from any responsibility in this case.

Both the remitting bank and the principal should learn this lesson, i.e., checking even the collecting bank’s address.

It is not encouraged but a bill of lading issued to the order of the presenting/collecting bank can help the exporter avoid this type of fraud.

Kind regards,

Mr. Old Man

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