2025 Americas Standby & Guarantee Forum: Executive Summary

Treasury, Working Capital, and Risk Management: Emerging Trends and Strategic Insights

Questions surrounding who is responsible for checking the genuineness of standbys and how to do so have persisted in the industry. In an English case in which Bank of Tokyo, Malaysia, denied issuance of a standby, a London judge determined that Bank of Tokyo, London, was responsible for signature verification.[[1]] A panelist strongly encouraged beneficiaries on the receiving end of a standby to make sure it is authentic by getting the standby advised to them by a trusted local bank.

The issuing bank-imposed duty requiring advising banks to authenticate beneficiary’s drawings started in Europe, according to one panelist who opposes the practice. Under a commercial credit a drawing is expected; not so under a standby. Other panelists agreed, saying banks are ill-positioned to determine who can sign a drawing and if a signature is forged. Banks should not take on authentication responsibility. Protections can be built into the underlying contract. Panelists referenced New York’s recent enactment of the 2022 Amendments to the UCC to recognize electronic records which will soon take effect. The Amendments address “control” of an electronic record and make electronic records and signatures legally equivalent to written documents and manual signatures. In this regard, parties will need some entity to take on the risk to guarantee that the control is real. One commenter added that ISP98 Rule 4.13 (No Responsibility to Identify Beneficiary) provides the general rule that the applicant bears the risk of fraud.