L/C is a letter of credit,
Letter of credit is basicly a gurantee for u and the person in the other country that you or he would not run away.
You deposit your cash with the bank. (your bank)
His bank and ur bank co-ordinate with each other.
The payment would be made to ur supplier on delivery of goods. (as mentioned).
If you dont get ur shippment in time, you can back off the deal. (as per agreement).
So theres no point of fraud in such a transaction.