Thursday, May 13, 2021

Insurance Group Warns of Ongoing Fraud Affecting Shipping Interests

Vigilance Needed to Avoid Clever Scams
Shipping News Feature

WORLDWIDE – The International Transport Intermediaries Club (ITIC), indemnity insurer for transport professionals, has issued a number of warnings on the increasing prevalence of documentation fraud and advises that members implement robust systems and controls to ensure that they minimise any exposure.

A pretty common type of fraud the ITIC sees regularly being committed is where communications are intercepted and bank details changed, whilst the original sender remains unaware. The ITIC has highlighted a recent case it handled on behalf of a broker in its warning to its members as it encourages extra vigilance.

The case involved a vessel coming off hire. Under the charter agreement the ship was due to be redelivered with a set quantity of bunkers on board. The returning charterer put the shipbroker in touch with their usual bunker supplier in China as it made sense for that supplier to provide all the bunkers which would be part funded by the returning charterer and part by the owner.

The supplier arranged for the vessel to be bunkered and sent the broker an invoice for around US$300,000 to cover the owner’s share of the fuel.

The following day, the broker received an email which he believed to be from the bunker supplier with a replacement invoice for US$300,000 advising that their bank details had changed. The broker failed to spot a misspelling in the bunker supplier’s name and the change in the contact details. Anticipating that the fake invoice would be spotted, the fraudulent ‘bunker supplier’ phoned the broker to ‘re-confirm’ their new bank details.

Unfortunately, the broker then passed the fake invoice to the owner who paid it. Unsurprisingly, the genuine bunker supplier uncovered the fraud when they realised they had not been paid. The owner had to pay the actual supplier and brought a claim against the broker for US$300,000 paid to the fake supplier due to negligence.

During the subsequent investigation, it was discovered that the owner had been given the opportunity to spot the changes and to check the new bank details themselves before paying the invoice. Regrettably, they chose not to perform any checks. However, as the broker had taken on the obligation to verify the bank details, it was clear that the broker was at fault and that their negligence had been a cause to the owner’s loss, although the owner had also contributed to their own loss. The claim was eventually settled for US$150,000.

The ITIC advises all parties to thoroughly check invoices before making payment, especially if there is any change to banking details. They should make use of publicly available contact details such as those displayed on the company website, to contact suppliers to verify details and not rely on the supplier contacting them, as it could be a fake supplier. Other red flags include the payee or bank account name being different from what is expected, banks located in unrelated countries and different emails or contact addresses.