Abusive Draw

Abusive Draw: A fraudulent or inappropriate drawdown on a letter of credit or guarantee, where the beneficiary attempts to obtain funds without fulfilling the necessary conditions.

Examples of Abusive Draws include:

• A beneficiary requesting payment without delivering goods.
• A contractor demanding funds without completing project milestones.
• A seller seeking payment without providing required documentation.

Key instances of Abusive Draws:

• Letters of credit in international trade.
• Performance guarantees in construction contracts.
• Payment guarantees in service agreements.

Abusive Draws undermine trust in financial instruments. They often lead to legal disputes and financial losses.