An Irrevocable Conditional Bank Pay Order (ICBPO) is a bank instrument that combines elements of both a bank draft and a letter of credit. It serves as a guarantee from the issuing bank to pay a specific amount to the payee, but only under certain conditions. However, ICBPOs have been banned and deemed illegal by most governments due to their economic risks and potential for abuse.
Many Bank Guarantee (BG) and Standby Letter of Credit (SBLC) providers and monetizers who still request ICBPOs as payment are either unaware of these regulations or deliberately disregarding them. Banks and financial institutions do not issue ICBPOs as a means for lessees to acquire bank instruments (BG/SBLC) without upfront payment. There is no such thing as a “free” bank instrument, as this would impose excessive liability on banks and contradict standard banking practices.
Governments have outlawed ICBPOs due to their significant impact on national economies. Here’s why:
Due to these risks, most governments have banned ICBPOs, allowing only a few specially licensed financial institutions with direct government approval to use them. However, these institutions rarely operate in the Bank Guarantee industry. Standard BG and SBLC payment guarantees via MT799 have replaced ICBPOs.
Engaging in financial transactions involving ICBPOs can expose businesses to fraud and financial losses. It is crucial to work with regulated financial institutions and avoid any entity still promoting ICBPO-based transactions.
Related Article: Top 10 Reasons Bank Instrument (BG/SBLC) Transactions Fail
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