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Synthetic Letter Of Credit for Malaysia

Synthetic Letter Of Credit Template for Malaysia

This document establishes a Synthetic Letter of Credit under Malaysian law, combining traditional letter of credit features with structured finance elements. It outlines the terms, conditions, and obligations of all parties involved in the transaction, ensuring compliance with Malaysian banking regulations, including both conventional and Islamic banking requirements where applicable. The document incorporates specific provisions for payment mechanisms, document requirements, and risk mitigation measures, while adhering to international trade finance practices and Malaysian financial services legislation.

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Synthetic Letter Of Credit

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What is a Synthetic Letter Of Credit?

The Synthetic Letter of Credit is a sophisticated financial instrument used in trade finance and structured financing arrangements under Malaysian law. It combines the security and payment assurance features of traditional letters of credit with synthetic elements that allow for more flexible structuring of trade finance transactions. This document is particularly relevant when parties require alternative financing structures that may not fit within conventional LC frameworks, while still maintaining the security and certainty of traditional LCs. It must comply with Malaysian financial regulations, including the Financial Services Act 2013 and Islamic Financial Services Act 2013 where applicable, and often incorporates international trade practices such as UCP 600 principles. The document is typically used in complex international trade transactions, project financing, or when traditional LC structures may not be suitable due to specific transaction requirements or risk considerations.

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

1. Parties: Identification of all parties: Applicant, Beneficiary, Issuing Bank/Financial Institution

2. Background: Context of the underlying transaction and purpose of the synthetic LC

3. Definitions: Key terms used throughout the document, including technical banking and trade finance terminology

4. Facility Amount and Currency: Specification of the LC amount and currency denomination

5. Term and Validity: Duration of the LC, including issuance and expiry dates

6. Payment Terms: Conditions for payment, including trigger events and payment mechanism

7. Documents Required: List of required documents for LC activation and payment

8. Representations and Warranties: Standard declarations by the parties regarding their capacity and authority

9. Fees and Charges: All applicable fees, charges, and commission structures

10. Events of Default: Circumstances constituting default and consequent remedies

11. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction details

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

1. Islamic Banking Compliance: Required if the synthetic LC needs to comply with Shariah principles

2. Syndication Provisions: Required if multiple banks/financial institutions are involved in providing the facility

3. Security Arrangements: Details of any collateral or security provided, if applicable

4. Transfer and Assignment: Terms for transferring or assigning rights under the LC, if permitted

5. Force Majeure: Provisions for unforeseen circumstances affecting performance

6. Anti-Money Laundering Compliance: Specific AML provisions if required by the nature of the transaction

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

1. Schedule 1 - Form of Drawing Notice: Template for beneficiary to make drawing under the LC

2. Schedule 2 - Required Documents: Detailed list and format of all required supporting documents

3. Schedule 3 - Fee Schedule: Detailed breakdown of all fees, charges, and commission rates

4. Schedule 4 - Conditions Precedent: List of conditions to be satisfied before LC becomes effective

5. Appendix A - Standard Forms: Collection of standard forms for various notices and certificates

6. Appendix B - Payment Mechanics: Detailed flowchart or description of payment process and triggers

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

Jurisdiction

Malaysia

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions


































Clauses




























Relevant Industries

Banking & Financial Services

International Trade

Manufacturing

Commodities Trading

Import/Export

Shipping & Logistics

Energy & Resources

Construction & Infrastructure

Islamic Banking

Relevant Teams

Legal

Finance

Treasury

Trade Operations

Risk Management

Compliance

Islamic Banking

Corporate Banking

International Trade

Credit

Relevant Roles

Trade Finance Manager

Corporate Banking Officer

Chief Financial Officer

Treasury Manager

Finance Director

Risk Management Officer

Compliance Officer

Islamic Banking Specialist

Trade Operations Manager

Legal Counsel

Credit Risk Officer

Commercial Banking 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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