An SBLC, a Template… and That Familiar Smell

In today’s case, we look at a question about standby letters of credit (SBLCs)—a legitimate instrument in trade finance, but one that is often misused in questionable transactions, especially in commodity deals involving intermediaries.

When an SBLC appears early in a deal, supported by “professional-looking” templates, it sometimes deserves a second, more careful look.

QUESTION

Dear Mr. Old Man,

Sincere greetings.

I have a question that I find quite confusing.

I am currently acting as an intermediary in an oil trade transaction. Recently, I was introduced to a supplier who requested that my buyer issue an SBLC via MT760.

I felt uneasy about this request and warned the supplier that it might be risky. However, he sent me a document explaining the MT760 format. The document looks very professional, which made me hesitate.

Given your expertise, I would greatly appreciate it if you could review the attached file when you have time.

From your perspective, is this arrangement risky or disadvantageous for the buyer? Could it even be a scam?

Thank you very much for your time and support.

Best regards,
T. Lee

________

ANSWER

Dear T. Lee,

I cannot conclude with absolute certainty—but I have to say, this carries a very familiar scent.

From the SBLC sample you shared, a few red flags stand out quite clearly:

• The maturity wording:
  “…at maturity date one year and one day from…”
  This is vague and incomplete. A proper SBLC should define expiry or maturity in a clear and unambiguous manner.
• The string of attributes:
  “…cash-backed, transferable, assignable, irrevocable, callable and divisible…”
  This kind of “all-in-one” wording is not typical in standard SBLC drafting. It tends to appear more in promotional templates than in real banking instruments.
• The rule references:
  “…URDG 758 format… Publication UCP 600…”
  Mixing different ICC frameworks like this is unusual. In practice, an instrument is typically subject to either ISP98, UCP 600, or URDG 758—each serving a distinct purpose.

Individually, each point might be arguable.
Taken together, however, they form a pattern often seen in SBLC templates used in non-genuine transactions.

In normal international trade practice, payment is typically handled through commercial L/Cs or documentary collections.
A standby L/C, by contrast, functions as a guarantee—triggered only when the applicant fails to perform.

When a deal starts with pressure to issue an SBLC built on a “well-prepared” template—with red flags like these—that’s the moment to pause.

My advice:
Do not spend time on transactions that never quite become real.

Best regards,
Mr. Old Man