INSURANCE\\\


Issue 8 2013 - Freight Business Journal More tales of the unexpected


In recent weeks there have been reports of bogus Chinese forwarders establishing online relationships with UK agents and sending container loads of cargo without the necessary bill of lading to secure the release of the container. The Chinese agent has then demanded a ransom to relay the necessary documentation. Without this, the UK forwarder can find himself with significant demurrage and storage bills, as well as heſty legal fees. This form of extortion needs to


be publicised, as do other forms of fraud and theſt, to keep forwarders and others aware of prevailing scams. TT Club, by revealing some of the details, hopes that UK companies will choose business partners abroad more carefully and improve the security of their


IT systems. Earlier in the year we drew


attention to the increasing amount of fraudulent use of internet clearing sites, particularly when operators need assistance in unfamiliar regions and especially at short notice, when operators could be tempted to use unfamiliar subcontractors found on the Web. We found cases of criminal


organisations purchasing legitimate but failing transport operators and continued to trade in their name, predominantly on-line and in a state of virtual insolvency, waiting for the chance to receive a valuable cargo before disappearing. Fraudulent road hauliers have also advertised vehicles available for backloads, again hoping for an unsuspecting forwarder, in too much of a hurry


to carry out proper checks, and with a high-priced cargo to move. More recently, however TT


Club has become aware of IT- based theſt that does not just involve misleading operators into thinking they are dealing with legitimate sub-contractors via the internet. Sophisticated criminals are now attempting to take control of operators’ IT systems. In the last few weeks a small but


significant number of incidents have been reported which at first appear to be petty office break- ins. The damage seems minimal - nothing is physically removed. However, more thorough investigations reveal that the ‘thieves’ were actually installing high-tech electronic devices in the IT network. Devices placed between


THE HUMAN FACTOR


TT Club has pinpointed an array of operational circumstances that oſten cause dangerous incidents through constant analysis of the claims it receives. At a recent presentation to the Asian freight forwarding industry in Hong Kong hosted by the Hong Kong Japanese Chamber of Commerce & Industry, the Club’s regional director Asia-Pacific, Phillip Emmanuel commented that “the overwhelming majority of claims, some 95% of those we’ve analysed, involved the human factor including operational causes and those related to maintenance (or lack of it) - the remainder being down to weather events.” The TT Club says that operators need to take more account of the human factor in their risk mitigation programmes, for example more robust training programmes for truck


drivers and equipment operators as well as warehouse and terminal personnel. Such training would help reduce incidents caused by bad handling and stowage, which together make up nearly a third of those classed as systems and process issues in the TT Club analysis. A further 40% were caused by errors that might be avoided with a more disciplined checking system and include clerical and contractual mistakes, incomplete customs declarations and the release of cargoes without receipt of the appropriate documentation. The Club highly recommends a detailed due diligence procedure when employing sub-contractors for transport services. TT’s analysis reveals that 66% of theſt-related costs arise either from a sub-contractor or from a contractors’ premises.


Middle East forwarders run greater risks


Forwarders that provide involved logistics services such as warehousing and distribution, procurement of additional product for sub-assembly, packaging and even soſtware uploading are opening themselves up to more extended liability. The TT Club told a workshop organised by the UAE’s National Association of Forwarding and Logistics (NAFL) in early October


that these demands oſten impose great risks on the forwarder, who is under considerable competitive pressure to accept such liability as a carrier. Risks can be compounded


when employing sub-contractors, as they are unlikely to be willing to take on the same liability. Indeed, the workshop underlined the difficulty forwarders in the Middle- east region have in sourcing reliable


trucking companies that are fully insured for any liability risk. TT Club applauded the initiative put in place by the NAFL to improve this situation by establishing insurance compliance standards for designated ‘safe operators’. Until compliance is fully adopted by the region’s haulage industry, adequate insurance cover for many transport operators will remain a problem.


MC S


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computer and mouse or keyboard, or between computer and server can record movements, key strokes and even download and print documents and screen shots to an external source. Target information are release codes for specific containers from ports. The use of such technology within freight forwarder and transport operators’ systems could easily provide access to trailers, cargo, CCTV equipment and even potentially to internal communication systems, perhaps diverting a driver to deliver to an alternative (unauthorised) destination. As TT Club has identified with other forms of theſt, the targets are


very specific, high-value cargoes, as well as contraband.


The


perpetrators are minimising their risk of exposure through such selectivity rather than a blanket approach that has been more common in the past. Such losses can give rise to


some potentially very large exposures and the Club is keen to assist with preventative measures. The increased sophistication of such ‘cyber attacks’ of course makes it more challenging for operators to defend against, but it emphasises the need for vigilance in safeguarding day-to-day operational processes. Increased physical security of IT installations is clearly recommended. However, it would also be wise for


17


The ingenuity of thieves has always led to disbelief among their unsuspecting victims. Ever more ingenuous and blatant types of fraud are being perpetrated in order to steal valuable cargoes. Mike Yarwood, claims manager at freight insurance specialist TT Club forearms, or at the very least forewarns transport operators, against nasty surprises.


operators to carry out a cyber risk assessment and evaluate what greater protection from hacking and data diverting devices may be available and appropriate. Whilst technological advances


undoubtedly improve efficiency and carriers and operators to can mitigate their exposure to theſt through the use of locks, alarms


and tracking systems,


unfortunately the same advances also benefit organised criminals. These practices currently seem


to be in their infancy. However, as invasive technology becomes more widely available and its cost inevitably falls, TT Club suggests that this could be the latest strategy by organised criminal groups to facilitate cargo theſt.


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