A Letter of Compensation (LOI) is a contractual document guaranteeing compliance with certain provisions between two parties. These letters are traditionally written by third-party organizations, such as banks or insurance companies, that agree to pay financial compensation to one party if the other party fails to meet its obligations. In other words, the main function of a law is to ensure that Part A ultimately does not suffer any loss in the event of a Part B misdemeanour. The concept of compensation is related to keeping someone compensated and a letter of compensation outlines the specific measures used to keep a party unscathed. BAFT, the global subsidiary of the American Bankers Association`s transaction bank, today released models of fraud compensation agreements that member banks can use to try to recover funds that have been fraudulently misappropriated from a customer`s bank to another bank. The documents, which are only available to BAF members, contain annotated and fulfillable versions of full and limited liability agreements that banks can choose based on their needs. The models come because criminals use increasingly sophisticated scams, including customer identity and ordering irreversible transfers. “In addition to working by law enforcement or a potentially long chain of correspondents, banks needed a quick and effective method to thwart theft by wire fraud,” said BAF UDC Samantha Pelosi. “These pre-negotiated agreements will be an essential tool for a bank that wants to encourage its counterparts to act when the weather is of the essence.” A letter of compensation states that all damages caused by the first part of the second part or by the property of the second party are the responsibility of the third party and are facilitated by the third party, in accordance with the contractual agreement. In this sense, laws, often referred to as “compensation obligations” or “obligations,” resemble insurance policies. Compensation letters can also be used when a second party lends something valuable to the first part, such as. B for example a car or a power tool. In this case, the first part (the owner) of the second part (the borrower) can submit a letter of compensation in which it declares that any damage is the borrower`s sole responsibility.

LOIs should always be signed by a witness, but in cases where excessively valuable items, it is better to sign an insurance agent, banker or other professional activist to sign the document, instead of just a witness.