Reimbursing bank not paying help needed

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Andi1507
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Reimbursing bank not paying help needed

Post by Andi1507 »

Hi all,

+ Issuing bank = Bank A (Central Bank of an Asian country)
+ nominated bank, reimbursing bank, advising = bank B (Larger Village Bank - International bank... operating in larger villages :-) )
+ LC issued, irrevocable, payment at sight by payment, at Bank B
Expiry Date xx.xx.xxxx. at bank B

reimbursement instructions: Please debit our account xxxx (which the issuing bank holds with the same bank B) for the amount 237,500 USD and confirm to us the amount utilised via Swift

Case:
a.) Bank B (which is our bank and by chance the correspondent bank of the issuing Bank A) advises the LC to us and debits advising charging from our account.
b.) We presented the documents at the counters to Bank B on time. Bank B sent the documents to Bank A for confirmation. In the remittance letter accompanying the documents and via Swift, Bank B confirms to bank A, that Bank B will debit Bank A account with the amount of 237,500 USD once Bank A confirms the documents and approves it.

Also Bank B sents 3 Swift messages to Bank A, asking for approval and once approved Bank B confirms that it will debit the account of Bank A and credit the amount to the beneficiary.

b.) Bank A sents Swift message to Bank B, approving the documents and asking Bank B to credit the amount to the beneficiary (my company).

Nothing after Bank A sent approval to Bank B happens for a week and then we get an email from Bank B saying:

the documents at our counter were forwarded to the issuing bank of the LC i.e. for their acceptance. The role of BANK B was restricted only to advise the LC to your good self.
With reference to mentioned L/C please be advised that due to our bank policies we are not in a position to participate in this letter of credit. This notice has been provided to you in compliance with article 9e of UCP 600, and should enable you to pursue other alternatives for the handling of this specific transaction. We request your good self to kindly contact with the applicant directly.


to Bank A, Bank B sent the following SWIFT 2 days later:
" We regret to inform you that we are unable to participate in this transaction as per internal policies of our bank and request you to settle the same directly with the presenter"

Questions:
a.) Can Bank B do this suddenly? didnt they commit to Bank A that they will do the transfer as instructed in the LC once Bank A approves?

WE only agreed to the LC in the first place, because of the payment instruction in the LC and because Bank B told Bank A via SWIFT and to us verbally that they will pay once Bank A approves the document.

What do you all think? thank you so so much for your help!
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picant
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Joined: Wed Aug 20, 2008 1:49 pm

Re: Reimbursing bank not paying help needed

Post by picant »

Hi Pal,

Complicated in effect! Nominated bank authorized to debit the Issuing bank account with itsself was not acting as per nomination.
If not confirming was not obliged but ....
However without seeing the l/c and specially the advice .
Probably sanctioned Countries or persons play a big role.
If you insert more details......
Other comments appreciated
Ciao
Andi1507
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Re: Reimbursing bank not paying help needed

Post by Andi1507 »

Hi and thank you so much Picant,I really appreciate your time and help.

The bank was not confirming bank. But Reimbursing bank and nominated bank.

In the original LC it says:

18-
Instr to Payg/Accptg/Negotg Bank
1-
we hereby authorize to debit our account No (USDxxxxxxxxxx)
with you for the mum of USD 237,560.00 and advice the Utilized
amount of the L/C for Verification purpose
2-
Please advise the L/C to beneficiary by swift and also
confirm to us


---
After that Nominated-Reimbursing- advising bank (same bank) wrote to Issuing bank when sending the documents in the remittance letter:

WE ATTACH THE FOLLOWiNG DRAFTS/DOCUMENTS FOR PAYMENT SUBJECT TO THE INSTRUCTIONS SHOWN
BELOW

WE ARE FORWARDING DOCUMENTS TO YOU ON WITHOUT EXAMINATION BASIS,
PLEASE CABLE CONFIRM YOUR APPROVAL VIA AUTHENTICATED SWIFT/TELEX
UPON APPROVAL, WE WILL DEBIT YOUR ACCOUNT WITH US FOR AMOUNT DUE
IN THE EVENT OF DOCUMENTS BEING ATTACHED HERETO WHICH ARE NOT
STIPULATED IN THE CREDIT, WE EMPHASIZE THAT SUCH DOCUMENTS ARE
FORWARDED TO YOU WITHOUT EXAMINATION AND WITHOUT ANY
RESPONSIBILITY OR UNDERTAKING ON OUR PART IN ACCORDANCE WITH
ARTICLE 13(A) UCP 500 OR 14/(G) OF UCP 600 AS APPLICABLE.
PLEASE MENTION THE ABOVE IS NUMBER IN ALL CORRESPONDENCE TO US.

----
And via Swift two week later:

WITH REPERENCE TO THE ABOVE BILL AMOUNT AND
FURTHER TO OUR REMITTANCE LETTER DATED 20 MAY
2023
KINDLY PROVIDE WITH YOUR GOOD BANK ACCEPTANCE
PIS
ORDER TO RELEASE PAYMENT

----

Then Issing bank sent SWIFT message back:

YOU ARE AUTHORIZED
TO MAKE PAYMENT FOR THE SUM OF USD 237560.00 (TWO
HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED SIXTY
ONLY) TO BENEPICIARY ACCOUNT AS PER LC TERMS AND
CONDITIONS
PLEASE SEND US CONFIRMATION BY SWIFT

---

The Reimbursing bank, nominating, advising bank, answered after 1 months via swift to Issuing bank

WE REGRET TO INFORM YOU THAT WE ARE UNABLE To
PARTICIPATE IN THIS TRANSACTION AS PER INTERNAL
POLICIES OF OUR BANK AND WE HEREBY REQUEST YOU TO
DIRECTLY SETTLE THE SAME WITH THE APPLICANT AND
PRESENTER. WE ARE NOT ABLE TO PAY THE PRESENTER

--
To myself the reimbursing bank which is also nominating bank and advising bank, AND MY Bank! sent suddenly the following email:

On 20th May, 2021 all the documents submitted at our counter were forwarded to the issuing bank of the LC for their acceptance.

The role of our bank was restricted only to advise the LC to your good self.

With reference to mentioned L/C please be advised that due to our. banks policies we are not in a position to participate in this letter of credit. This notice has been provided to you in compliance with article 9e of UCP 600, and should enable you to pursue other alternatives for the handling of this specific transaction.

--

but this is nonsense. They can not envoke 93 as they advised me the LC and all amendments. Just and simply the transaction was left.

Please let me know if you need more information. Thanks again for your help!
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picant
Posts: 1962
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Re: Reimbursing bank not paying help needed

Post by picant »

Hi Pal,
thanks for details. I assumed that this behaviour is due to Sanctions. However the advising bank should require you the authorization to remit the documents to the issuing bank. Having an account with Issuing bank your advising bank should have conduct due diligence as per AML, KYC etc rules.
Frankly I dont know the exact reasons for not partecipating to this transaction.
IMHO, a legal advice is now necessary!
Let me/us know, if it is possible.
Ciao
dinesh2476
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Reimbursing bank not paying help needed

Post by dinesh2476 »

Hi

This is one of the disadvantages we have in the LC, the nominated bank is not a confirming bank.

Bank acting on its nomination: Are there any set up with nominated bank in line with UCP article 12A( to check with legal for subsequent action)

If the answer is NO, then we are losing the opportunities of claiming to advise bank/nominated bank failed to make payment despite issuing bank instruction to them to debit their account.

For your case they are just payment facilitators, they may decide any action on their later.

But advising bank generally helps reveal the reason for not participating unless the reason is sanction-related

Thanks & Regards
Dinesh Kumar
.
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