Documentary Collections - A Different Look to Confront Misuse and Money Laundering

Documentary collections facilitate not only the movement of goods but also the movement of funds. Use of a documentary collection is normally agreed to between trading parties to protect their respective interests. The parties usually already have an established trading history and there is a certain amount of trust built among them.

The Uniform Rules for Collections (URC 522) articulates the practices that govern collections made subject to it. From a bank’s perspective, key provisions of the rules include that:

• Banks have no obligation to handle a collection, any collection instruction, or subsequent related instructions (Article 1(b));
• Banks are only permitted to act on instructions given in a collection order within the URC rules (Article 4(a)(1)); and
• Banks will not examine documents to obtain instructions (Article 4(a)(2)).