Forfaiting Glossary

Glossary Items beginning with : A

ABS Asset Backed Security

A security which is supported by assets such as mortgages, car loans, credit card receivables, owned by the issuer of the security and usually placed with a trustee.

Acceptance Credit

A Letter of Credit which includes a Draft in its required documentation. The Draft will be accepted by the bank on which it is drawn and may be discounted and the proceeds paid to the beneficiary.

Administration

A procedure under the insolvency laws of common law jurisdictions. In UK law, the administration regime is governed by the Insolvency Act 1986.

Advance Payment Bond

A guarantee to a buyer of goods or services that advance payments made by it to the seller will be repaid in the event of the seller defaulting on the contract.

Advising Bank

Correspondent of an Issuing Bank to whom a Letter of Credit is sent for transmission to the Beneficiary of that Letter of Credit.

Amendment under an L/C

A change to the terms of a Letter of Credit. An amendment should originate with the Applicant and follow the same path as the Letter of Credit.

AMLFT : Anti Money Laundering and Financing of Terrorism

Involves the processes, systems and controls to identify and verify relevant information about the person/entity one is dealing with including information pertaining to the relative transaction with the aim of detecting and preventing money laundering and terrorist financing.

Applicant

The buyer or importer of goods who applies for the issue of a Letter of Credit by an Issuing Bank.

Assignment

An assignment is a legal method of passing rights but not obligations from one person e.g. the Beneficiary of a Letter of credit to a forfaiter purchasing the Beneficiary’s rights under that Letter of Credit. Under English law, a legal assignment must be in writing, absolute and confirmed by a notice of assignment such as in a letter of credit, a guarantee or an insurance policy whereby the rights of a future debt passes from assignor to assignee.

Availability Date

The date by which a set of satisfactory documents has to/will be delivered to the forfaiter ready for discounting. Under the URF where a transaction is described as ‘immediately available’ that date is ten Business Days after the transaction is entered into.