NEWS\\\ Insurance

Freight fraud in the digital age

Fraudulent practices in the supply chain are evolving as quickly as digital technology. TT Club’s Peregrine Storrs-Fox helps to identify the risks and put measures in place to protect operators and their customers.

In the global freight supply

chain you can easily become a victim of fraud - notably carrier fraud and payment fraud – especially in today’s digital business environment that reduces the chances of criminals being caught. No-one – freight forwarders,

shippers, carriers, container owners, logistics service providers, ports, warehouse and depot operators – should underestimate how lucrative an industry fraud is. Using sophisticated, low-risk tactics, fraudsters

can easily steal

large amounts of money or consignments. TT Club has focused on various issues in the past, including those involving Chinese freight operators as well as fraudulent bills of lading.

However, more varied risks

occur in the supply chain including those related to payments, procurement or billing and identity of carrier. Prevalent

types of fraud

include: identity of carrier fraud - which includes ‘round the corner theft’ - and fake carriers; payment fraud, which includes mandate fraud and ‘CEO fraud’, along with procurement or billing fraud. Organised crime groups,

who operate much like successful businesses, are more often than not behind these activities, which are planned, coordinated and collaborative. The sophistication of their knowledge is sobering; not only are these criminals adept at avoiding detection, but

Issue 3 2021 - Freight Business Journal

many are skilled logisticians. They are able to procure the services of individuals with appropriate skills like truck driving licences, replicate intricate documentation and successfully manage time sensitive operations, with a degree of confidence and competence that doesn’t raise suspicion. As such, their very existence

depends on successful avoidance of detection by law- enforcement and they employ a range of techniques to achieve this, such as untraceable proxy servers, false identities and spoofed email addresses. Typically, none of a fraudsters’ identifiers will be genuine. Fraudsters are well organised

and operate internationally across multiple jurisdictions, making it very difficult for national law enforcement agencies to combat them and making any post incident recovery of funds virtually impossible. As many corporates will know, money-laundering risk itself has to be a significant focus for legitimate business operating globally. One of the most prolific scams is payment

fraud. This has been on the increase due to the the ease internet

with which facilitates

transactions. Businesses (and often individuals) are targeted, getting them to transfer money to a bank account operated by the fraudster. The two main types of payment fraud are mandate fraud of

(seeking amendment existing


instructions) and CEO fraud (impersonation of senior authorised individuals). Usually, they target accounts staff using spoofed sender email addresses. Equally, procurement

fraudsters prey on those responsible for authorising invoices and payments. By infiltrating systems and organisational structures, the criminals seek to convince them to respond to fraudulent requests for payment. There are common themes where payment frauds are concerned: the criminals will typically have a thorough understanding of the targeted business, including the details of people in positions of authority and even when those individuals are absent. Such

valuable information enables the criminals to

exploit entities in ways and at times of increased vulnerability. Fraud involving false

identity introduces another entire layer of sophistication on the criminals’ part. This requires an ability to deceive legitimate industry professionals into releasing valuable cargo to a bogus carrier (most often in trucking).

Such criminals

have mastered the entire process, able to falsify documents and

incorporation sophisticated

from insurance through

to freight documentation and licencing. Typically using


screens to avoid suspicion, an increasing trend through 2020 was for drivers and vehicles to turn up at depots to collect cargoes without any prior

correspondence. Such

is the level of intelligence, knowledge and preparation that, in too many cases, the driver appeared to be entirely credible and the cargo duly released. The planning, preparation

and research which underpins the criminals’ activities is extremely cost efficient – time is their main


investment. Infiltrating a target business, whether it be to develop an understanding of the hierarchy or learning about the movement of goods and the haulage companies which routinely collect goods, might be time intensive, but it is all low tech and usually carries negligible risk. When the potential gain

is considered against the investment

in arm preparation,

there is little wonder that the criminals


with enough information to achieve their goals and avoid detection successfully. TT Club is advises freight

operators to mitigate their risk from theft including all types of fraud. It will continue to issue information to create awareness of such activities and guidance on how to combat the threats. This will take the form of: fraud education and recognition of criminal practices; the importance of vigilance; best practice in due diligence; and the escalation process, identifying suspicious activity and

red-flagging urgent

requests. More information can be accessed via

DP World spends £40 in Southampton

Insurer the TT Club says that new clauses in the RHA conditions of

carriage could

put the onus on shippers under some circumstances. It points out a number of

potentially significant changes in the latest version of the conditions released last year and effective 1 September. They include changes to clauses protecting carriers’ obligations if delays in transit result from the customer’s omission, clarifying the issue of liabilities for loading and unloading cargo from the vehicle and providing a definition of ‘commencement of transit’ with implications for liability in the event of damage or loss prior to that point. TT Club’s Mike Yarwood

says that they could have a significant impact on the

liabilities sustained by carriers under certain circumstances. “Since Brexit, for example, there have been a number of instances of hauliers arriving at UK ports seeking to cross the EU border without the necessary documentation or permits. Documentary errors, potentially by the customer, cause delay, which if perishable cargoes are involved can result in extensive losses. Under clause 5 (4) of the new conditions, a carrier has the right to suspend or possibly even terminate the performance of the service, and in addition damages such as loss of business and driver’s wages could be claimed from the customer,” he explained. TT Club and its legal partner Hill Dickinson are encouraging

hauliers and other stakeholders who incorporate the terms of the earlier, 2009 version to alter their own standard trading conditions in line with the new provisions. A further issue clarified in the

2020 conditions is connected to liabilities for loading and unloading cargo from a vehicle. Clause 4 now states that unless otherwise agreed in writing, responsibility for loading cargo onto the vehicle and unloading it at the consignee’s premises rests with the customer. Further, the customer is also required to indemnify the carrier from and against all and any loss, damage, death or injury that might arise during such operations. Another

clause that has

been altered affects thefts from warehouses, a consequence primarily of pandemic-related backlogs and delays. This includes thefts from loaded trailers awaiting departure.

In this regard, Clause 7 of the new conditions sees a material change

to the definition of

commencement of transit. This is defined as after the consignment has left the premises from where the consignment is collected. This is of significant

assistance to the carrier when no alternative secure parking facility is available en route to the destination or the driver does not have sufficient driving time to reach a secure parking location. In the spirit of security,


would now be advantageous from both a liability and a security perspective to leave the

loaded trailer at the

shipper’s premises until the driver’s hours allow a more seamless delivery.

membership/member-benefits/ conditions-of-carriage-and- storage

DP World is to invest £40 million in its Southampton container terminal in 2021. The work includes the already completed dredging and widening of the berths to accommodate the world’s biggest ships in partnership

with Associated

British Ports. It will also spend £10m on

11 hybrid straddle carriers that consume up to 40% less fuel than diesel-electric powered machines. It also plans a £3m investment in the redevelopment of the yard

of the empty container yard to increase capacity by 25% and create more flexibility for port users. There will be a new Border

Control Post (BCP), including UK Border Force and port health inspection facilities, to expedite checks on cargo entering the country. A quay crane rail will be extended 120 metres to service all berths at the terminal. Other quay cranes will be relocated or decommissioned to maximise utilisation and speed up loading and unloading.

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