Cargo frauds warning
to banks
London,
7 September 1999
- ICC Commercial Crime Services (CCS) today warned banks to be especially vigilant
in checking the authenticity of bills of lading presented under documentary
credits, and said international scams in recent years have already resulted
in multi-million dollar losses.
Captain Pottengal Mukundan,
Director of CCS, said the International Chamber of Commerce's Uniform
Customs and Practice for Documentary Credits (UCP) offered tried and
tested procedures for financing international trade that enabled transactions
to go forward smoothly in the overwhelming majority of cases.
"This is fine - as long
as the documents themselves are genuine. But if banks have provided extensive
credit on the basis of forged documents, they may find themselves facing losses,"
Captain Mukundan said.
The remedy: random "due
diligence" checks of bills of lading by the trade finance departments of banks
that handle documentary credits. The CCS bureau that specializes in combating
trading and shipping fraud, the International Maritime Bureau, routinely carries
out such checks as a service to its members. CCS is a specialized division of
the International Chamber of Commerce, the world business organization.
The CCS Director said: "The
problem has nothing to do with the documentary credit system itself, but it
has everything to do with prudence. It is a bit like making sure that the house
exists before granting a mortgage."
Describing the frauds, Captain
Mukundan said it was clear that buyers and sellers involved had acted in collusion
for a number of years, building a substantial documentary credit trade record
that led banks to lower their guards and accept financial exposure.
"The business appears to
be consistent, involving the same parties, the same banks, and the same commodities
- the kind of transaction that banks like to see. The only difference between
these fraudulent transactions and a genuine one is that when the deal is genuine,
the goods actually exist."
Among details that banks
should look for in bills of lading for containerized cargoes is the container
number, without which it is extremely difficult to locate a missing cargo -
one of the items of collateral against which the bank agrees to finance the
transaction.
"A containerized cargo described
on a bill of lading without container numbers should put banks on immediate
notice that there may be something seriously wrong with the document, " Captain
Mukundan said.
Due diligence check list
for banks
1. Containerized cargo:
(a) Are the container numbers
stated on the bills of lading?
(b) Does the total weight of the cargo exceed the capacity of the containers?
(c) Is the issuer of the bill of lading the physical carrier of the cargo or
has it been issued by a non vessel owning common
carrier (NVOCC)?
2. Does the bill of lading
have contact details for the issuer of the bill of lading, i.e. address, telephone
and fax numbers?
3. Should there be a problem
with the credit transaction, is there sufficient information on the bill of
lading to enable the bank to locate and exert control over the cargo?
These are basic checks.
If in doubt, the bank should contact the IMB.
International Maritime
Bureau
Maritime House
1 Linton Road
Barking,
Essex IG11 8HG, UK
Tel. +44 181 591 3000
Fax +44 181 594 2833
E-mail Click here to send a mail
C
ommercial
Crime Services
Commission
on Banking