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Legitimate letters of credit are never sold or offered as investments. They are
issued by banks to ensure payment for goods shipped in connection with
international trade. Payment on a letter of credit generally requires that the
paying bank receive documentation certifying that the goods ordered have been
shipped and are en route to their intended destination. Letters of credit frauds
are often attempted against banks by providing false documentation to show that
goods were shipped when, in fact, no goods or inferior goods were shipped.
Other letter of credit frauds occur when con artists offer a "letter of credit"
or "bank guarantee" as an investment wherein the investor is promised huge
interest rates on the order of 100 to 300 percent annually. Such investment
"opportunities" simply do not exist. (See Prime Bank Notes for additional
information.)
Tips for Avoiding Letter of Credit Fraud:
- If an "opportunity" appears too good to be true, it probably is.
- Do not invest in anything unless you understand the deal. Con artists rely on
complex transactions and faulty logic to "explain" fraudulent investment
schemes.
- Do not invest or attempt to "purchase" a "letter of credit." Such investments
simply do not exist.
- Be wary of any investment that offers the promise of extremely high yields.
- Independently verify the terms of any investment that you intend to make,
including the parties involved and the nature of the investment.
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