Standby letters of credit (SBLC)

 

SBLC Procedure

 

Standard procedures vary depending on the issuer, below are listed two different procedures for acquiring an SBLC.

 

Example 1.

 

Procedure

Amount: Min $5m USD – Max $100m USD (smaller/larger sums by prior agreement).

Rate: typically 6+2 (flexes slightly based on volume, rate confirmed upon application, and amount).

This document outlines the key stages in the receiving and processing of a leased SBLC. Buyers must provide sufficient proof of identity to enable the anti-money laundering checks to be made.

All our SBLC’s will be ‘fresh cut’ and issued via SWIFT or Hard Copy depending on client and contract needs, which means they must have the financial backing. Prior to issuance we engage with ‘Account Holders’ to ensure there is sufficient cash backing to any instrument issued.

For avoidance of doubt, the leased SBLC process utilizes USA-based escrow agents, to hold funds for each stage of the process. This ensures that the buyers have the funds to transact each stage and it also ensures that once the provider has delivered each stage that they are paid without delay.

 

 

OUTLINE PROCEDURE

WE Prove >> then >> You PROVE

 

  • You submit ‘application form’, confirming request
  • We PROVE we have capability by issuing Free of Charge Draft RWA / SBLC docs as per application request
  • You PROVE you are genuine and have capacity and pay Application fee
  • We PROVE we have capability by
    engaging and issuing Escrow Contracts

OPTIONAL RWA STAGE:
You PROVE capability and sign Escrow and pay nominal RWA fee into escrow

We PROVE we have capability by issuing RWA


  • You PROVE you have the finances - by paying in final issuance fee into escrow
  • We PROVE we have capability by issuing 760 or Hard copy

 

 

 

 

 

 

 

 

 

 

 

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Detailed Procedure

Amount: Min $5m USD – Max $100m USD (smaller/larger sums by prior agreement).

Rate: typically 6+2 (rate flexes slightly based on volume).

1.       IMPORTANT - Buyer must have the funds available to transact, as they will have to put funds into escrow to enable the contract. Please only apply if you have the capacity/ funds.

2.     Buyer submits the following Compliance documents to verify their identity and RWA (Risk-Weighted Assets) status:

a) Application Form – this MUST be on our form as the client MUST APPLY to us, for us to process anything – Form will be provided – this needs to include the name and address of the Buying Entity and the Buyer’s transacting bank/location and the contact information of the person and proof of their Identity for the applicant, etc (Beneficiaries can be marked as To Be Determined (TBD) - see Application form for completion requirements)

b) OPTIONAL Proof of Funds ( POF) - We operate from a basis of trust-We don’t insist on POF at outset and will accept Bank to Bank later–but clients must understand if they engage and don’t have the funds/capacity to contract, then they would lose any application fees paid to date.

c) Pro Forma invoice/copy of underlying contract provided – (ideally these should provided at the outset, but the procedure can be started with these documents to follow prior to 760 delivery.)

3.     Upon receiving the Application Form, the provider will review the documents and confirm the rate available based on the initial amount/volume.

4.     All payments for each stage to be paid into escrow, prior to each stage being transacted. ( note escrow charge 1% of the balances paid at the buyer's cost).

5.     Payments and processing.

a) Account Holder verified - Provider reviews contract value, and confirms it has an account holder on its side with sufficient funds/backing to be able to enter into the SBLC contract. Rate is also confirmed at this stage. 

b) Draft verbiage free of charge will be issued for the buyer to confirm it meets their receivers’ requirements. Adjustments can be made to verbiage or issuers to suit the client's needs.

c) If Client confirms they wish to proceed and that they can afford the SBLC and the verbiage meets their needs. Client pays an ‘Application Fee’ of 0.1% of the face value of the SBLC, ($15,000 USD minimum ), to formally open case and get escrow opened and contracts started. This fee is ‘fully credited on close’ but is non-refundable if the client fails to complete the SBLC issuance process.

d) Escrow contracts issued and the legal / issuance process commences / funds from the applicant and payments are processed in line with the formal contract.

e) OPTIONAL RWA STAGE: Escrow funded in line with RWA payment required – RWA Fee typically 0.1% ( varies based on amount of SBLC) again this fee is fully credited on close but is nonrefundable if the client fails to complete the SBLC issuance process.

f) OPTIONAL RWA ISSUED: RWA issued and upon proof of RWA delivery, RWA fees released from escrow.

g) Funds for the full issuance placed into escrow by the client ( i.e. balance of rate quoted e.g. 6+2).

h) 760 processed and sent via SWIFT or hard copy depending upon the bank.

i) Upon confirmed 760 delivery, final funds are released from escrow.

 

~ End of process ~

  

 

Example 2.

 

Produced

 

SBLC Client Guidance and RWA Verbiage

I confirm my intention to enter into a Joint Business Venture/Private Placement upon the issue and delivery to your nominated company as the named beneficiary of a fully cash-backed Standby Letter of Credit to be issued by XXXX bank located at XXXX and I hereby confirm and acknowledge that the following procedures have my approval for this transaction, which is subject to contract, and my bankers will be instructed to comply where required:

1.     I shall complete and sign in blue ink a KYC in which will be exhibited a two-page Passport copy and a RWA (Risk-Weighted Assets) Letter in the text set out in the APPENDIX below stamped by xx bank and signed by two bank officers together with copies of the Bankers’ Business Cards.

2.     I will arrange for the RWA Bank Letter to be received by me at the Email address stated in my KYC and upon receipt will forward the Email and the RWA letter to your Intake Officer/Private banker whose Email address will be given to me at that time.

3.     Following receipt by your Intake Officer/Private banker of the Email and RWA Letter, I will make arrangements for the Email and RWA Letter to be verified by fixing a window time when a call can be made via the xxx Bank switchboard when your Private Banker can speak directly to one of the bank officers who issued the Email and RWA Letter.

4.     After a successful verification a conditional Joint Venture Agreement will be issued, the terms of which will require me to cause my bank to issue and deliver the SBLC according to the terms of the Agreement. Upon receipt of the said Agreement, if it has my approval, I shall sign it and return it and instruct my bankers to issue the SBLC.

5.     Following receipt by the trading company of the SWIFT MT760/MT542 and its verification, the trading company shall commence trading in accordance with the terms of the Trading Agreement.

 

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