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Synthetic Letter Of Credit for United Arab Emirates

Synthetic Letter Of Credit Template for United Arab Emirates

A Synthetic Letter of Credit is a specialized financial instrument governed by UAE law that provides a structured framework for complex financial transactions while offering the security of a traditional letter of credit. Operating within the UAE's sophisticated financial system, this document incorporates both local regulatory requirements and international banking practices. It details the terms, conditions, and obligations of all parties involved, while ensuring compliance with UAE Central Bank regulations and, where applicable, Islamic banking principles. The document includes specific provisions for payment mechanisms, documentation requirements, and risk allocation between parties.

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What is a Synthetic Letter Of Credit?

The Synthetic Letter of Credit serves as a crucial financial instrument in the UAE's sophisticated banking and commercial landscape. This document is typically employed when parties require the security features of a traditional letter of credit but need additional flexibility or specific structuring to accommodate complex financial arrangements. It combines elements of conventional letters of credit with synthetic features, making it particularly valuable for large-scale projects, trade finance, and structured financial transactions. Operating under UAE law and Central Bank regulations, this instrument must comply with local banking requirements while potentially incorporating international banking standards and Islamic finance principles where applicable. The document's structure reflects the UAE's position as a global financial hub, accommodating both conventional and Islamic banking practices while providing comprehensive protection for all parties involved.

What sections should be included in a Synthetic Letter Of Credit?

1. Issuing Bank Details: Complete details of the issuing bank including license information and regulatory status

2. Beneficiary Information: Full details of the beneficiary including legal name, registration details, and address

3. Credit Amount and Currency: Specification of the credit amount, currency, and any tolerance levels

4. Validity Period: Clear statement of the effective date and expiry date of the synthetic LC

5. Terms and Conditions: Detailed conditions for drawing under the synthetic LC, including documentation requirements

6. Payment Terms: Specific payment mechanisms, timing, and settlement procedures

7. Documentation Requirements: List of required documents and their specifications for drawing under the LC

8. Governing Law and Jurisdiction: Explicit statement of UAE law governance and jurisdiction details

9. Assignment and Transfer Rights: Terms regarding the transferability of the synthetic LC

What sections are optional to include in a Synthetic Letter Of Credit?

1. Shariah Compliance Declaration: Required when the synthetic LC needs to comply with Islamic banking principles

2. Counter-Guarantee Provisions: Include when there is a separate counter-guarantee arrangement

3. Syndication Terms: Required when multiple banks are involved in issuing the synthetic LC

4. Force Majeure Provisions: Detailed force majeure terms when specifically requested by parties

5. Electronic Processing Terms: Include when the LC will be processed through electronic banking channels

6. Sanctions Compliance: Required when international parties are involved or cross-border transactions are contemplated

What schedules should be included in a Synthetic Letter Of Credit?

1. Schedule 1 - Fee Schedule: Detailed breakdown of all applicable fees, charges, and commission

2. Schedule 2 - Required Documents: Comprehensive list and format of required documents for drawing under the LC

3. Schedule 3 - Operating Procedures: Step-by-step procedures for utilizing the synthetic LC

4. Appendix A - Form of Draw Request: Standard template for making draws under the synthetic LC

5. Appendix B - Specimen Signatures: Authorized signatures for all relevant parties

6. Appendix C - Compliance Certificates: Ƶ for various compliance certificates required under the LC

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions




































Clauses




























Relevant Industries

Banking and Financial Services

International Trade

Commercial Real Estate

Infrastructure Development

Energy and Resources

Manufacturing

Construction

Import/Export

Shipping and Logistics

Wholesale Trade

Relevant Teams

Legal

Finance

Treasury

Trade Finance

Risk Management

Compliance

Banking Operations

Credit Administration

Islamic Banking

International Banking

Relevant Roles

Chief Financial Officer

Treasury Manager

Trade Finance Manager

Financial Controller

Risk Management Officer

Compliance Officer

Legal Counsel

Banking Relations Manager

Credit Manager

Finance Director

Trade Finance Specialist

Islamic Banking Specialist

Documentary Credits Manager

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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