A letter of credit is a credit instrument issued by a bank guaranteeing payments on behalf of its customer to a third party when certain conditions are met. LCs are commonly used to finance exports. The exporters want assurance that the ultimate buyer of its goods will make payment, an assurance given by the buyer’s purchase of a bank letter of credit. The LC is then forwarded to a correspondent bank in the city in which the payment is to be made. The LC is drawn on when the goods are loaded for shipping, received at the importation point, clear Customs, and they are delivered, etc. LCs can be used to facilitate money laundering by transferring money from a country with exchange controls, thus assisting in creating the illusion that an import transaction is involved. According to several OFAC enforcement actions, sometimes financial institutions amend or delete OFAC-listed names or countries in LCs to avoid detection by OFAC screening tools.

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