CONVENTIONAL & ISLAMIC TRADE FINANCING AND FRAUD MANAGEMENT

The Letter of Credit (LC) or the Documentary Credit (DC) is a very ancient payment device. Its present form and the rules that govern it evolved from the international sale of goods. In recent decades the scope of LCs have changed from one that guarantees payment for a performance to one that guarantees payment for non performance.

The functions of the LC have also been creatively modified to cater for advance payments, immediate payments, delayed payments, revolving payments and also guaranteeing non-payments. A good knowledge of their operations would be an obvious advantage to traders.

However, just a sound knowledge of LC operations alone is insufficient to conduct profitable business. The trader should also be aware of all the Trade Financing products available from banks, and of significant importance is to obtain the correct type/s, quantum and tenor of the product/s that his business requires.

This is a very comprehensive course and covers:

  • LC operations,
  • Conventional & Islamic Trade Financing products, and
  • The structure or computation of the type/s, quantum and tenor of each of the products required by the business.
Course Objectives: 

A comprehensive knowledge of Letters of Credit Operations, Trade Financing Products and the Computation of Trade Financing Requirements. 

Target Audience: 
Manager
Others
In-house Course Fee: 
RM3000 per day
Public Course Fee: 
RM980 per pax
Number of days: 
2
Course Date: 
Tuesday, August 22, 2017 to Wednesday, August 23, 2017
Course Methodology: 

DAY 1

General introduction to the:
  • Different terminologies used for each of the trading parties,
  • Methods / Terms of Payment, namely:- Prepayment, On Consignment, Open Account, Documentary Collection and Documentary Credits and ‘Sight’ and ‘Usance’ terms
  • Challenges to international trade
  • INCOTERMS 2010 - The functions of the 11 INCOTERMS showing at which point delivery is made and the costs and risks involved to the buyer and to the seller at each stage of the transaction
Common Trade Documents

Banks are involved in handling Letters of Credits (LCs), also known as Documentary Credits (DCs) and deal in documents only and not in the goods. Therefore, it is of paramount importance that they and the traders themselves fully understand the different types of trade documents and their purpose/s.

Explanations will be given on the features and functions of the main documents, namely: Pro-forma Invoice / Commercial Invoice / Certificate of Insurance/ Bill of Lading / Bill of Exchange and other documents and the relevant ICC Rules applicable to each of them.

Documentary Collections (non-LC bills)

The ‘collection’ cycles are briefly explained, including:

  • the duties and responsibilities of each of the parties to the ‘collection’;
  • the advantages and disadvantages in trading under ‘collections’ and
  • the main rules in the URC 522, governing ‘collection’ bills.
Conventional Documentary Collections are compared.
Basic Islamic Banking concepts
  • Main features of Islamic Banking
  • Main Syariah Rules
  • Non-tradable goods under Islamic Trade Financing.
Documentary Credits (DCs) or Letters of Credit (LCs)

Documentary Credits are explained together with their various trade cycles, and the benefits and uses of : Sight / Usance / Transferable / Back to Back / Red Clause / Revolving & Standby LCs, are clearly highlighted.

Various types of Islamic LCs

Examination of the features and operations of various Islamic LCs, eg:

  • Wakalah LCs
  • Murabahah LCs
  • Musyarakah LCs
  • Mudharabah LCs
SWIFT LCs

Explanation of the differences between ‘Mail’ and ‘SWIFT’ LCs and how to decipher SWIFT LCs.

How to apply for / amend an LC

Briefing and exercise on the completion of an LC Application and the issuance of an LC, based on a sample of a ‘pro-forma’ invoice.

Discussions on how an LC may be available eg: by sight payment; by acceptance or by negotiation.

Exercise on the issuance of an LC to reinforce the participants’ understanding of the basic features of an LC.

The procedures for the application, issuance, advice and amendment of the LC and the standard documents required are included and explained.

The following standard instructions to:

  • Exporter
  • Negotiating Bank
  • Reimbursing Bank, are also explained.

Day 2

Shipping Guarantees
  • Purpose and features of Shipping Guarantees
  • How to apply for a Shipping Guarantee.
  • Endorsement of Air Waybills and 1/3 Bills of Lading
  • Procedures in handling lost Bill of Lading
Features of the Kafalah (Islamic) Shipping Guarantees, and Conventional Shipping Guarantees are compared.
Import services

Inward bills drawn under LCs – the following are explained

  • How banks check documents drawn under LCs
  • How banks handle discrepant documents and refuse payment
  • Danger/s of discrepant documents to buyers
Bankers Acceptance

Brief overview of the operations of Bankers Acceptance (BAs)

  • Purpose and features of  Bankers Acceptance
  • Financing ‘cycle’ of BAs.
  • How to apply for Bankers Acceptance financing
Operations of Islamic Bankers Acceptance (AB-i)
  • Purpose and features of  AB-i
  • Financing ‘cycle’ of AB-i
  • How to apply for AB-i
Discounting procedures of BA and AB-i  compared, based on an exercise.
Trust Receipts

Full explanation of the operations of Trust Receipts (TRs)

  • Purpose and features of Trust Receipts
  • Financing ‘cycle’ of TRs
  • How to apply for Trust Receipt financing
Murabahah Trust Receipts (TR-i)
  • Purpose and features of TR-i
  • Financing ‘cycle’ of TR-i.
  • How to apply for TR-i financing
Murabahah Working Capital Finance (MWCF)
  • Purpose and features of MWCF
  • Financing ‘cycle’ of  MWCF
  • How to apply for MWCF
Export Credit Refinancing (ECR)
  • Overview of ECR to finance (pre export) purchases of raw materials  and post exports
  • Financing ‘cycles’ of pre and post financing.
Islamic ECR
  • Brief explanation of conditions governing Islamic ECR.
Export services

Inward Letters of Credit.

  • Actions to be taken by seller prior to receiving an LC from buyer
  • Action by banks on Inward LCs received from other banks
  • Why and when is it necessary to have inward LCs confirmed.
Bill Discounting/Purchasing/Discounting/Forfaiting

Export facilities

  • Full explanations of the operations of Bills for Collection / Bills Purchasing / Discounting / Negotiating / Forfaiting shall be given.
Islamic Bills Purchased (IFBEP / IDBEP)
  • Full explanation of conditions governing Islamic Bill Purchases.
Handling discrepant trade documents
  • Common discrepancies in export documents
  • Handling discrepant export documents
  • Measures to adopt in negotiating discrepant export documents
Bank Guarantees (BGs)

Explanations of the features and uses of the following types of BG:

  • Tender Bonds,
  • Performance Bonds,
  • Sub-contract Bonds
  • Advance Payment Bonds
  • Security Bonds, 
  • Customs Bonds,
  • Immigration Guarantees,
  • Cash Cheque Guarantees, etc
Kafalah Bank Guarantees

Features of the Kafalah (Islamic) Bank Guarantees, and Conventional Bank Guarantees are compared.

Fraud Management – Presentation and discussions on:
  • Warning signs / red flags / recent cases of fraud.
  • The numerous types of fraudulent practices perpetrated through the use of LCs and other trade documents, and how these could be avoided.
  • Best practices in LC usage.
Questions and Answers.
Trainer: 
Course Outlines: 

This course is designed to provide participants with the opportunity to learn:

  • The operations of the various Trade Financing instruments and Bank Guarantees  under Conventional & Islamic Concepts
  • To interpret the ICC Publications, viz: ISBP; UCP 500, URC 522,   URDG 458 and URCG 325 in respect of Documentary Credits,  Documentary Collections and Bank Guarantees.
  • The special requirements of Islamic trade financing and Bank Guarantees
  • To manage, control and monitor routine import and export operations effectively
  • To provide practical solutions to customers trade related problems
language: 
English

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Email: info@tni.my

Jimmy Ong Tel: ‭+60 16 216 1383‬ (Call on Whatsapp for free)