Certified Regulatory Compliance Manager (CRCM) — Question 206

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Answer options

• A. Implement the letter of credit because there is no boycott language on its face
• B. Require ABC to indemnify the bank against any potential loss for participation in a boycott
• C. Not implement the letter of credit
• D. Have the letter of credit confirmed by a bank in Country X

Correct answer: C

Explanation

The correct answer is C because implementing the letter of credit could expose First National Bank to legal risks due to ABC Co.'s involvement in a boycott, even if the letter lacks specific language. Options A, B, and D do not address the potential legal implications of ABC Co.'s agreement to certify its non-involvement with blacklisted firms, making them less appropriate choices.