Posted by: Financial Sith Lord | December 9, 2009

Experience: Discounting an SLC (Standby Letter of Credit) and Dupped by Nan & Tandooris..

In early 2009, I had a rather bitter experience in discounting an SLC (Standby Letter of Credit). The whole story goes something like this.

I had a company in Singapore of which I had an equity equivalent to 30% of the issued shares. The largest shareholder of the Company wanted to acquire the 30% shares thus made me an offer of US$ 2,500,000. I agreed with the offer and they requested that the payment is made via them issuing a Standby Letter of Credit from a European Bank’s branch  in Singapore. After providing them with details of the receiving bank (my bank in Malaysia), they proceeded to SWIFT the SLC through. Soon after, my bankers confirmed their acceptance of the SLC on my behalf and issued a statement that the SLC were authenticated and verified on my behalf. Happy, I didn’t immediately act on it. At that point of time, I had laid off this trade for about 4 years already. Through my experience, if I had an authenticated paper, it would be easy for me to get it funded, pledged for a facility, or in worst case, get it discounted, like how I’ve done it a million times before.

About 1 month after the date of issuance, I went to the receiving bank (my bank) and requested that they grant me a financial facility of which the SLC were to be used as collateral. At first , they requested that I submitted a full loan application, including project papers, cash flows etc, explaining what I was going to do with the facility, and show how I was to pay back the facility. In my head, I was thinking that it was odd for the bank to do that. With that mentality, I put the application on hold, and proceeded to scout around with other banks. With a Yellow bank, they wanted the SLC to bear their name as beneficiary instead of mine. I communicated with the issuer and they said that the SLC had been issued and they are not willing to re-issue a new one as it involves financial costs. I understood, thus forgetting about my intention to proceed with Yellow bank.

I then went to a Blue bank, and it took them ages to give me a response. There it goes down the drain.. again.. Then, I was introduced to someone who claimed to have an existing facility with my receiving bank. He also claimed that he is connected with the trade finance head of the bank and things could be smooth from now on.

After numerous meetings, we finally signed a working agreement, clearly stating the responsibilities of each connected party. Me being the owner of the SLC and beneficiary, and them being the facility owner. The split ration was determined, and the introducing agent’s commission was also spelled out. Then, the agent came to me saying that the bank’s trade finance boss want’s a piece of the cake, and wants 5% up front before issuing the facility to us. I was startled with that request. I further negotiate with the agent (who claims to be concerned for me), and somehow they managed to conjure up a figure – RM 200,000 up front, and the remaining balance amounting to 5% to be paid upon disbursement of funds. I told them that it was RM 150,000 and the balance upon disbursement.. Then, they agreed.

Money was duly paid through the agent, and after being promised day after day, week after week, they called and said that they’re having problems authenticating the SLC. I said, why are you having these issues when initially you said everything was authenticated and verified? Why all this after I paid the RM 150,000?..

After about a week of that nonsense, I received an alarming call from my counterpart in Singapore saying that the issuing bank received unwarranted requests by SWIFT from the receiving bank, requesting numerous authentication protocols that were simply out of the norm. They said, that the issuing bank had advised them to cancel the SC or if not, they would have no choice but to take this matter to the Monetary Authority of Singapore. Feeling intimidated, my counterpart instructed the banks to cancel the SLC. My counterpart said further , that since their payment to us was dependent on a documentary credit facility, they could not proceed with the transaction and called it off.

Back to the receiving bank and its agent, I went ballistic with them and demanded that they returned my money. Believe it or not, those scoundrels have yet to return my money, and it has cost me the world.

So for you readers, if you are approached by someone by the name of  P.K, the owner of Nan & Tandoori stall in Ampang Jaya, please stay away.. He is the biggest crook ever lived. After my incident with him, then only I learnt of his many unscrupulous acts and tactics in cheating hard-earned money from unsuspecting people. He may claim to have good connections with the head of trade finance dept of various Malaysian banks, and he may even call up one elderly women named F to ‘act’ as a member of the approval committee, just to convince you.  STAY AWAY!!.


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