A form of financing in which Bank A issues a letter of credit as collateral to Bank B to issue a separate letter of credit to the beneficiary.  

This process occurs when the underlying agreement between the applicant and beneficiary includes restrictions on the credit quality of the Bank issuing the letter of credit, the location of the issuing Bank, or other terms that prevent the applicant’s Bank from issuing a direct letter of credit to the beneficiary. A sanction evader can use back-to-back letters of credit to conceal the name of a sanctioned bank from the documentation.