As monetizers of bank instruments, we constantly receive requests to monetize a small group of the same documents, over and over again. The huge majority of such valueless documents come from different intermediaries all the time, because the owners believe the previous intermediaries were not doing their job finding a buyer or a monetizer for said instruments, when in fact they did; it is just that most sellers/owners/beneficiaries ignore that what they have is a worthless document with no real market value.
Some documents have no value because they are plain and simple forgeries. Sometimes the owners know this, and sometimes the owners/beneficiaries were victims themselves of a scammer, and then it becomes our task to explain to the owners of the documents, that what they have is a forgery, and that they will never be able to obtain a penny from such documents. Some owners do not believe us, some owners were aware of the forgeries and just withdraw their documents from our consideration, only for the documents to end up back in our desks a few months later; this time sent to us by another intermediary. We can only keep educating our intermediaries in how to spot a forgery, and reporting the forgeries when we have enough proof to do so. Of course, some scammers keep trying, by imposing their “procedures” which in general, involve rushed deals with no hard copies to follow, advanced payments, and so on. This is why most serious lenders and monetizers will only release funds after the bank has received not only the MT-760, but the hard copies by courier as well, and had confirmed them in full with the sending bank.
Who has not seen the “Euroclear” screenshots? Setting aside the eternal debate about if BGs and SBLCs can be loaded and traded in Euroclear; the fact is, Euroclear screenshots and documents showing that said instruments are in the Euroclear systems come to our desks fairly often too. Sadly, most of the times, the forgeries are so evident that we do not even need to consult with the banks, a simple printing of the documents had revealed that what was visible on the screen is not the same as what was actually in the document but hidden by a simple software mask or by letters of the same color as the background. And the reality is, when any of these instruments actually gets into the Euroclear system, they never surface on the internet at the trade forums or business networks, because the owners will go to their bankers/brokerage house officers requesting a trade or a sell, and their bank/brokerage house will issue a sell ticket and they will trade these documents in the blink of an eye in the Euroclear system itself, and sometimes the owner does not even get to know who the buyer was, because it was a simple buy and sell ticket transaction. This reinforces the fact that almost all documents showing BGs and/or SBLCs on Euroclear are forgeries, and for this reason, cannot be monetized.
Some other documents have no value because they are issued by companies that are not licensed banks. It is very common nowadays, to hear about a “Bank Guarantee” or a “Stand-By Letter of Credit” issued by “General Equity Building Society” in New Zealand, “Suisse Credit Bancorp Ltd” in London, “Suisse Bancorp” in Hong Kong, “Trade Bancorp” in the USA and India, “Credit Boston International” in the USA, “Credit Lyonne Trade Finance Družstvo” in Slovakia, “Embank LLC” in the USA, “Soleil Chartered Bank” in the USA, Romania and Comoros, “Suisse Credit Capital Limited (New Zealand)”, “Suisse Credit Bancorp Ltd” in the UK, “Suisse Bancorp Ltd” in Hong Kong, and the list keeps going; the problem with all of the entities mentioned above is that, NONE OF THEM IS A BANK. A bank is a financial institution or corporation, authorized by a government, to provide banking services to the general population, often by allowing them to receive deposits, extend credit, and other financial services restricted to be provided only by banks. Not one of the entities mentioned above currently holds a banking license from any country in the world. Do not get confused by words like “bancorp”, “credit”, “finance”, “trade”, or my favorite “embank”; not a single one of the mentioned entities is a bank, that is why none of the is using the words BANK, BANCO, BANQUE, BANKA, БАНК and some other translation for it, because said words are restricted in almost all countries, to be used only by licensed BANKS, not consulting firms or other type of businesses. Now, by its own nature and definition, a “BANK GUARANTEE” can only be issued by a BANK. This is not only common sense, but actually regulated by banking laws in most countries. A similar situation happens with “Stand-By Letters of Credit”, which are also debt obligations issued by BANKS, and regulated as such by banking laws in most countries as well. The bottom line is, only banks can legally issue Bank Guarantees and Stand-By Letters of Credit. If you happen to have a BG or an SBLC issued by any of the entities cited by name and country above, you have a document that legally and commercially has no value, and because of that, no commercial bank in the world will accept it as method of payment, or even as collateral for a loan or a credit line.
Leaving aside for a moment the laws of each country, which can be said to apply or not to a particular issuer of a Bank Guarantee or a Stand-By Letter of Credit; we cannot ignore the always invoked by everyone and their dogs, yet mostly unknown by everyone “Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication no. 600 (“UCP”), which are rules that apply to any documentary credit ( including, to the extent to which they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that it is subject to these rules. Since Article 2 clearly defines what a bank is, and their roles as “issuing bank”, “advising bank”, “confirming bank”, “nominated bank”, and so on, we can only deduct from said rules, that they only apply to instruments issued by BANKS. So if you need to get a BG or a SBLC that must be UCP-600 compliant, it must be issued by a licensed bank, otherwise, it will not be UCP-600 compliant, regardless of the wording of the document. And since it will not be UCP-600 compliant, no bank will ever accept it as collateral or even as a documentary credit, which is what the thing is supposed to be in its more pure and natural form. While it is true that URDG-758 changed this from banks to “a bank, other institution or person” may act as a guarantor, the fact is that URDG-758 rules implied that financial stability of the guarantor is obligatory, and that the issuance of said documents shall be govern by the internal legislation of each country. Regardless, most banks will only accept documentary credit from other banks, due to their financial stability and their full compliance with local laws.
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Unfortunately, most people confused the term NOT RATED with the fact that said entities are not real banks, but private companies offering consulting services, and sometimes, issuing documents that are beyond their legal and financial capacity, hiding themselves behind the excuse that because they are an “offshore bank” or a foreign corporation because they only deal with foreigners, they do not need to hold a banking license or comply with reserve deposits with the Central Banks of the jurisdictions from where they operate. The reality is, a rating is just an opinion given by one person or company, about the credibility of the bank or institution what the rating is about; but this has almost nothing to do with the truth, that the documents in question are worthless not because of the credit rating of the issuer, but because the issuer is not a bank. Always disregard the “we are not a rated bank”, and check if they are actually a licensed bank, then if they are not, just walk away and keep your money in your pocket.
Whatever way you want to see how they operate, the reality is, no commercial bank in the world will accept a BANK GUARANTEE or a STAND-BY LETTER OF CREDIT issued by any of the entities listed above, because they are not banks, and therefore their documents have no value for the banks. Perhaps some private company (out of ignorance more than anything else) will accept such a document as collateral for a private credit line with them, but that is about it, no commercial bank in the world will, and that is a fact. And because no commercial bank will ever accept those documents as collateral, no real monetizer will be able to work with said documents as well.
Yet another appearance of the same type of instruments often surfaces, but with a twist. The documents in question are often huge in their face values, and they are issued by the “Central Banks” of Venezuela, Brasil, Egypt, some African countries and so on. There is just a small problem with that, most Central Banks do not offer financial services directly to the public, they only dictate general economic policy for their countries and local banks; but as a general rule, they do not issue Bank Guarantees and Stand-By Letters of Credit; all the ones we had received had turned out to be forgeries, and most Central Banks had made public knowledge this fact of them not issuing BGs and SBLCs, by issuing statements to the press, in their web sites, and in their governments’ gazettes and newspapers. Despite this well-known fact, we keep receiving documents from “Central Banks” from time to time.
And of course, another problem we have when trying to monetize instruments is the fact that for political reasons, most Eurozone regulated banks avoid as much as they can, to work with banks of certain countries. Try to monetize an instrument issued by a Latin American country, and we wish you the best of luck with that. China? Unless it is from Hong Kong, you are out of luck too. Even Europe is not free of that problem; for example, while the list of embargo banks from Russia and Ukraine is very small, most Eurozone regulated banks prefer to not accept as collateral instruments issued by any Russian or Ukraine based banks, they say it is to reduce their risks as much as possible, and to avoid working with banks that while not currently on the embargo list, can be included in said list at any time. Some other countries have strong, reliable and highly praised banks with excellent credit ratings, like Azerbaijan, yet almost no Eurozone regulated bank wants to work with instruments issued by them; this limits the ability of most monetizers to work with instrument from banks of these countries regardless of the credit rating of the bank. And of course, there are always small banks from Eurozone regulated countries, which for some strange reason, issue instruments which seem to be well beyond their financial ability to cover in case of default, and for this reason bigger banks who are aware of this problem, simply will not work with these smaller banks’ instruments.
Now you know the main reasons why some documents that are supposed BGs and SBLCs, keep surfacing on the net and been promoted by different intermediaries every time the surface, because they are either plain forgeries, or because they are worthless documents issued by entities that are not banks, or because they are issued by banks from countries that for political reasons, Eurozone regulated and American banks do not like to work with. We see these “instruments” around often, but there is nothing we, or anyone else, can do about them, and this is why they keep circulating month after month. This is why, if you are looking to purchase or lease an instrument, make sure you are getting your instrument from a government licensed commercial bank, and not from one of those shoddy companies that just want your money and do not care if you will be able or not to legally use the document, by using it to cover your import/export needs, and perhaps selling it, using it as collateral, or monetizing it in any other form.
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