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How to Verify an SBLC or Bank Guarantee Provider Before You Pay a Dirham

By Masiar Rahaman14 August 202610 min read

Every few weeks, someone walks into our office in Deira with the same document set. A glossy term sheet. A "provider" offering a Standby Letter of Credit for lease at a percentage of face value. An NCND agreement they have been told is an ICC standard form. And a deadline: sign by Thursday, or the allocation goes to someone else.

They are almost always about to lose money.

This article is the checklist I give them. It is not about our services. It is about how any UAE business owner can establish, in about an hour and at no cost, whether the party across the table can actually do what they say.

Start here: the instrument is real, the pitch usually isn't

Standby Letters of Credit and bank guarantees are ordinary, unglamorous banking products. They are issued every day by licensed banks, governed by published rulebooks, and transmitted over SWIFT. Nothing about them is exotic.

That is precisely why fraud in this space works. The instrument names are genuine, so they survive a casual Google search. What gets distorted is the way the instrument is described.

US banking regulators made this point three decades ago and it has aged perfectly. A 1993 interagency advisory — issued jointly by the Federal Reserve, FDIC, OCC and others — told banks to be alert to "any traditional type of financial instrument — such as a standby, performance or commercial letter of credit — that is somehow referred to in an unconventional manner, such as a letter of credit referencing forms allegedly produced or approved by the International Chamber of Commerce." The same advisory listed the fictional variants then in circulation: "Prime Bank Notes," "Prime Bank Guarantees," "Prime Bank Letters of Credit."

Note that the ICC misappropriation was already in the regulators' sights in 1993. It is not new.

So the first test is linguistic. A real instrument is issued by a named bank. If the document in front of you refers to a category — "a prime bank," "a top 25 European bank," "an AA-rated Western European institution" — rather than to an institution with a name, an address and a regulator, you are not looking at a banking transaction.

The structure test: who is the applicant?

Here is how a genuine standby comes into existence, in the ICC's own description: "the applicant will make a request, typically to its bank, to issue a SBLC in favour of its contract's counterparty."

Read that carefully, because every element matters.

You are the applicant. Your bank is the issuer. It underwrites your credit, takes security or cash cover, and then puts its own name on an undertaking in favour of your counterparty, for your underlying obligation. Once issued, the ICC notes, the issuer "must then make its own, independent examination and payment decisions independent of input from the applicant."

Now compare that to the offer you have been given. In the typical "leased instrument" proposal, a provider you have never banked with claims to own an instrument already. No one assesses your credit. You pay a percentage of face value up front. The instrument is then supposedly assigned to you — and, crucially, nobody ever intends to draw on it. It exists to be "monetised."

On "leasing"

I want to be precise here, because precision is the whole point of this article.

I am not going to tell you the ICC has banned leasing. It has not published such a ruling, and pages that claim otherwise are inventing authority — which is itself one of the behaviours regulators flag.

What I can tell you is structural, and it is stronger. None of the three rulebooks that govern these instruments — UCP 600 for documentary credits, ISP98 for standbys, URDG 758 for demand guarantees — contains any concept of leasing one. They are built around an issuer who undertakes to pay a beneficiary against a presentation. ISP98 defines a standby as "an irrevocable, independent, documentary, and binding undertaking." There is no room in that definition for a third party who owns an instrument and rents it out, because an undertaking is a promise by a bank, not an asset sitting in an inventory.

Transfer, where permitted at all, is narrow and defined. In 2004 the ICC's own Financial Investigation Bureau stated that "in most cases, guarantees are not negotiable, assignable or transferable, unless expressly stated in the covering contract."

And when regulators describe the trading of these instruments, they describe it as a warning sign. The Federal Reserve lists, verbatim, among the hallmarks of fraudulent schemes: "Legitimate financial instruments, such as letters of credit, guarantees, and medium term notes, are bought and sold or traded in manners that are not realistic — for example, standby letters of credit are bought and sold."

Courts have gone further. In 2019, a US federal court sentenced a promoter to ten years for a scheme in which victims were offered the chance to "lease" what the Department of Justice described as phony Standby Letters of Credit with face values around $100 million, retaining a portion as a "non-recourse loan" with the balance deployed in overseas "platform trading." Clients paid roughly $150,000 each up front. The money went to a personal checking account.

If that structure sounds familiar, that is the point.

One honest caveat, because it is where the confusion comes from. Legitimate third-party credit support does exist. The ICC acknowledges an applicant "may receive silent or openly known support to have a standby letter of credit issued" — a parent company, an insurer, or a financing partner strengthening your application so that your bank issues in favour of your counterparty. That is real, and it is a large part of what firms like ours arrange. It is categorically different from paying a stranger to use an instrument issued for someone else.

The verification hour

Now the practical part. Set aside an hour and work through these in order.

1. Is the issuing bank real and licensed?

If the instrument is to be issued by a UAE bank, search the Central Bank of the UAE's licensing register directly at centralbank.ae/en/licensing. It lists licensed banks, finance companies, exchange houses and payment providers, searchable by name.

If the claimed issuer is not there — and is not on its own home regulator's equivalent register — stop.

2. Is the provider authorised, or merely registered?

This is where most UAE deals go wrong, and it deserves the most attention.

"We're a DIFC company" is the single most common credibility claim presented to GCC business owners. It is also frequently meaningless. The DFSA states it plainly in its published authorisation explainer (October 2023): "The fact that a company is incorporated in the Dubai International Financial Centre (DIFC) does not mean that it is able to provide financial services." And then the number that should end most conversations: "Over 85% of DIFC-incorporated companies cannot provide any financial services at all, as they do not hold a financial services licence from the DFSA."

Registration is a company formation. Authorisation is a licence to do regulated business. They are entirely different things, and one is routinely presented as the other.

Check the actual registers:

Note also that a free zone licence is not a permission to trade on the mainland. The UAE government portal states that "a company registered under a respective free zone is not permitted to carry out business outside the free zone, i.e. on the mainland" without further approval.

3. Search the warning lists

Check the name — and near-matches of the name — against:

Search near-matches deliberately. The DFSA has published alerts about exactly this pattern: several similarly-named entities where only one is licensed. A 2024 DFSA clarification named four "Seven Capitals" entities that "are not, and have never been, licensed by the DFSA," while a fifth, with a specific DIFC registration number, was.

One important limitation, which the FCA states about its own list: "if a firm isn't on the list, it may still be unauthorised or be a scam." Absence from a warning list proves nothing. Presence on one ends the discussion.

4. Verify through URLs you found yourself

Never use a verification link supplied by the counterparty. In 2001, the ICC's Commercial Crime Services shut down an operation that used look-alike domains — subdomains dressed to resemble Bloomberg and Euroclear — so that victims could "confirm" fake guarantees against a website the fraudsters controlled. Forged guarantees in that case ran from $50 million to over $400 million, with advance fees in the hundreds of thousands.

5. Read the SWIFT claims properly

This is where technical-sounding language does the most damage.

MT760 is the message that actually issues a demand guarantee or standby letter of credit. MT700 issues a documentary credit. MT767 amends a guarantee or standby.

MT799 is, in SWIFT's own official designation, a Free Format Message. It is a text channel. It carries whatever the sender types. It is not an instrument, it creates no payment undertaking, and it is not proof of funds — whatever a broker tells you a "pre-advice" or a "conditional SWIFT" signifies. The Federal Reserve specifically lists "conditional SWIFT" among the nonsensical terminology characteristic of these schemes, alongside "key tested telex" and "funds of good, clean, clear and non-criminal origin."

If someone offers to send you an MT799 as evidence that an instrument exists, they have told you it does not.

The red-flag list

Any one of these should stop a transaction. Most fraudulent offers contain several.

Red flag Why it matters
"Prime bank," "top 100 world bank," "top 25 European bank" Regulators state that no such class of bank exists and that "prime bank" instruments do not exist. Real instruments name a bank.
An instrument offered for lease, sale or purchase The Fed lists standbys being "bought and sold" as a hallmark of fraud; the DOJ prosecuted the lease pitch directly.
Advance fee before any instrument exists In every prosecuted case, the fee was the product.
"Roll programme," "40-week programme" Both named verbatim by the Federal Reserve as fraud indicators.
"Platform trading," "private placement programme" "Platform trading" is the term used in the 2019 US Department of Justice prosecution described above.
MT799 offered as proof of funds Officially a "Free Format Message." Creates no undertaking.
"ICC-registered," "ICC-approved NCNDA/IMFPA" The ICC states it "has never published any rules on non-circumvention and non-disclosure agreements for these kind of contracts." The Fed lists inaccurate ICC references as a red flag.
Claimed backing by the Fed, World Bank, IMF or ICC These bodies do not sanction or participate in such programmes. Their names are routinely misappropriated.
Secrecy; NDA demanded before basic disclosure The Fed flags a "high degree of secrecy" and claims of a "secret market."
Validity stated as "one year and one day," or similar The ICC's fraud bureau (2004) flags fraudulent documents that state a year followed by an extra day, week or month. The Federal Reserve lists the same pattern.
"DIFC/ADGM registered" implying regulated status Over 85% of DIFC-incorporated companies hold no financial services licence.
Escrow that turns out to be a personal account Documented in the 2019 DOJ case.
Pressure to decide immediately, or an "allocation" that expires A standard investment-fraud indicator — and in our experience the single most reliable one. Genuine bank facilities do not evaporate on Thursday.
No bank anywhere in the chain In a genuine transaction, your own bank issues. If no regulated bank will put its name to it at the outset, there is no instrument.

What a real conversation sounds like

If you take one thing from this article, take this: in a legitimate trade finance transaction, someone assesses your credit.

You will be asked for audited financials. For your trade licence and ownership structure. For the underlying contract, the purchase order, the counterparty's details. For your banking history. You will discuss security — cash margin, a lien over goods, a corporate guarantee. You will be quoted a commission, typically per annum with a minimum period, plus SWIFT and amendment charges, and it will be invoiced by a bank.

It is slower than the alternative and considerably less exciting. It is also the only version that ends with an instrument your counterparty's bank will accept.

If you are still working out which instrument your deal actually needs, start with our guide to letters of credit, bank guarantees and standby LCs.

If nobody has asked to see your accounts, nobody is taking a risk on you — and if nobody is taking a risk on you, nobody is issuing anything.

Frequently asked questions

Is a leased SBLC legal? No rulebook governing these instruments — UCP 600, ISP98 or URDG 758 — recognises a concept of leasing. All three are built around a bank issuing an undertaking to a beneficiary. The US Federal Reserve lists standby letters of credit being "bought and sold" among the hallmarks of fraudulent schemes, and the US Department of Justice has prosecuted the lease pitch, describing the instruments involved as phony. Treat any lease offer as a stop signal.

Does an MT799 prove an instrument exists? No. MT799's official SWIFT designation is "Free Format Message." It is unstructured text and creates no payment undertaking. A demand guarantee or standby is issued by MT760; a documentary credit by MT700.

A provider says it is DIFC registered. Is it regulated? Not necessarily, and usually not. The DFSA states that incorporation in the DIFC does not confer the ability to provide financial services, and that over 85% of DIFC-incorporated companies hold no financial services licence. Check the DFSA Public Register for authorisation, which is a separate thing from registration.

Can the ICC confirm whether my instrument is genuine? No. The ICC publishes the rulebooks that instruments can be made subject to. It does not register, approve, endorse or verify individual instruments, and it has stated it never published rules on NCND agreements. Any document claiming ICC registration of an instrument is misrepresenting the ICC.

How do I check whether a UAE company is licensed? For a bank or finance company, search the CBUAE licensing register. For a DIFC firm, the DFSA Public Register. For ADGM, the FSRA Public Register. For a Dubai mainland trade licence, the Invest in Dubai licence search. Then check the name and near-matches against the DFSA, FSRA, SCA and UK FCA warning lists.

I have already paid a provider and received nothing. What now? Preserve everything — the term sheet, all correspondence, wire confirmations, and the entity and individual names used. Report to the police in the emirate where you transacted, and to your own bank's fraud team, which may be able to attempt recall on recent transfers. If the counterparty claimed regulation by the DFSA, FSRA or SCA, report to that regulator, as false claims of regulated status are themselves actionable. Then take independent legal advice before any further payment — the most common second loss is a "recovery fee" paid to get the first one back.

This article is general information about trade finance practice and does not constitute legal or financial advice. Rules, registers and regulations change; verify current requirements with the relevant authority before acting.

Sources

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