A letter of credit fraud is a type of scam in which the scammer attempts to make money via faulty business transactions or tells victims that a letter of credit is an investment.
1. One way of performing letter of credit fraud is to create a fake company. The
scammer
will
tell the victim that he or she is a representative for a company that can ship goods to the victim at very low costs.
After the
victim signs the
letter of
credit, the scammer goes to a bank and collects the money. The company will
then typically disappear, and the victim either will receive nothing or will receive
vastly inferior goods.
2. The second method of performing a letter of credit fraud is to tell the victim that
the
letter represents
an
investment. The scammer tells the victim that he or she
will
receive a high interest rate from purchasing the fake letter of credit. Letters of
credit are
not
investments, however, and cannot be used as such.