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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


payment


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


smoke


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


27


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


themselves


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 www.ttclub.com


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,


it


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. https://www.rha.uk.net/


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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