WHERE THE PRESENTING/COLLECTING BANK DOES NOT ACT IN GOOD FAITH OR EXERCISE REASONABLE CARE

QUESTION FROM PTN (Vietnam)

I have a case to seek your advice. Our bank has forwarded 6 sets of D/P(s) for USD525,000 to a bank in Egypt with the instructions “Release Documents against Payment”. After many payment tracers, the collecting bank replied that all sets of D/P have been released against 30 days, 60 days, 120 days…from health approval date (as payment instruction on cover letter). Because of our arguments, they sent back the photocopies of Fake Cover Letters to prove their action. Payment instruction and form of Fake Cover letter were absolutely changed.

What can I do now?

Many thanks.
PTN (Vietnam)

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ANSWER FROM MR. OLD MAN

Hi,

The collecting/presenting bank must act in good faith and exercise reasonable care. It must release the documents as per the remitting bank’s instructions. It is fraud 100% if what you described is true.

Fraud is a matter of local law. USD525,000 is a big amount that is worth a lawsuit. If all other solutions fail, the principal may bring the case to the court of law for settlement. The collecting/presenting bank may be accused of two crimes: (i) delivering the documents not as per the remitting bank’s instructions; and (ii) committing fraud.

Best regards,
N.H.Duc
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FROM PTN

Many thanks to Mr Duc's advice.

There are some details of faked cover letter:

• Computerized form without signature I/O form of our bank with 2 authorized signatures.
• Payment instruction: Deliver documents to Drawee, as per seller request that's buyer (Mondial Import-Export) will pay the total amount within 60 days from final health approval date I/O release documents against payment (D/P) .

The collecting bank affirmed that they had received the a/m cover letter from our bank.

What are benefits of collecting bank in this fraud?
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FROM MR. OLD MAN

Hi,

No benefit. I guess the collecting bank could have delivered the documents to the drawee based on the drawee's promise that he would pay in some days. Now that the drawee has failed to fulfil his payment promise, the collecting bank must try to delay the payment by creating forged cover letters.

Good luck.

Kind regards,
N.H.Duc
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FROM RAJAN (Canada)

Hi,

I would do the following in such a situation, before resorting to legal course of action.

A) Esclate the matter to highest authority of that bank, be it Chairman/MD of the bank, with all documentary evidence. (You have to do some research to get to the right person) If they are bothered about their reputation they will act.

B) If nothing happens then Complaint to the Central Bank of Egypt.

The above two actions would yield results. Legal Action should be the last resort.

Good Luck.

Regards
Rajan

P.S. I have heard form one of the staff of a Bank in Egypt that there is shortage of USD in Egypt and collection payment is delayed due to that.
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FROM MR. OLD MAN

Dear Rajan,

Agreed that taking legal action is the last resort. We would also handle cases of non payment in the same manner as yours and receive payments eventually.

Best regards,
N.H.Duc
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FROM GABRIEL (Singapore)

Would you consider issuing a letter, by your legal counsel, to the collecting bank's CEO and its legal and compliance officer?
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FROM PTN

Hi,

If the last resort (Legal action) must be used, who will be the plaintiff in this case (our bank or the seller)?

Thanks so much for your all advices.
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FROM MR. OLD MAN

Hi,

If the remitting bank has acted strictly in accordance with the instructions of the principal but fails to receive the payment from the collecting bank/drawee, it is not responsible to the principal in any way (see Article 11). So, the plaintiff in this case would be the principal himself.

Kind regards,
N.H.Duc
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