cpd types

The perception of risk in cross-border trade will no doubt settle, after COVID-19, but at a higher level than it was in the halcyon days between 1989 and 2019 and with a possible increase in usage of traditional mechanisms for risk mitigation.

The 30-year period after the fall of the Soviet Union and its Comecon clientele will come to be seen as one where dozens of countries opened up to trade, where supply chains could be altered to arbitrage labour costs, labour regulations, legal restrictions, tax regulations and so on.

COVID-19 has shown that a heavy price was being prepared for the garnering of these supposed benefits, which went hand-in-hand with an explosion of trade transacted on Open Account terms, as opposed to on Documentary terms, using either a Letter of Credit or a Documentary Collection.

Of course those terms were themselves not free of risk, and either might result in an exporter holding a piece of paper for a period (often called "at term" or "at usance"), or else obtaining that piece of paper and selling it on, with or without recourse.

The piece of paper is either a Bill of Exchange or a Promissory Note. The difference is that the Bill of Exchange is drawn by the exporter and accepted by the importer, whereas the Promissory Note is issued by the importer, hence its alternative title – a Single-Name Bill.

It was quite a common criminal offence to forge Bills of Exchange and Promissory Notes, and it was an offence regarded as very serious and possibly punishable by death. The Old Bailey archives contain many such cases.

Report OA17520323 of 23rd March 1752 references the crime of Bernard Agnew and accomplices, who "did utter, and publish as a true, a certain false forged Promissary Note of Hand, for the Payment of 25 l. 4 s. (£25.20 in the new money) with Intent to defraud Elizabeth Agnew, Widow". Bernard Agnew was known as "a Dealer also in forged Seamen's Wills and Powers. He was doubtless the Contriver of this Forgery upon Captain Andrew Agnew". We can surmise that Agnew created the Note with a forged signature of Captain Agnew (deceased), and tried to get Mrs Agnew to pay it out of Captain Agnew's estate.

Report t16900115-25 of 15th January 1690 relates that Robert Young alias Smith "a Minister, was Indicted together with Mary Young his Wife, for forging a false Bill of Exchange in the fourth Year of King James, in the name of one John Clark upon Jonathan Kendal for 20 l. (£20 in the new money) payable to one Robert Smith, being the Prisoner himself". This Bill of Exchange named the accused as a third-party beneficiary of dealings between John Clark and Jonathan Kendal. Young’s wife Mary then went round to try and obtain goods and money against the bills…and Young a Clerk in Hold Orders!

COVID-19 will, amongst other things, bring the scum to the surface, and not just in cyberfraud, black marketeering, and hoarding, but also in traditional types of fraud including ones connected to the transacting of international trade using Letters of Credit and Documentary Collections.

Bob Lyddon is an author for accountingcpd. To see his courses, click here.

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