brief on the international trade & related frauds

1. INTERNATIONAL TRADE
&
FRAUDS

2. INTERNATIONAL TRADE FRAUDS
 Total number of frauds in international trade is very
small when compared to the total volume of trade of
total frequency of trade transactions

3.  But when they occur …………..
INTERNATIONAL TRADE FRAUDS

4. DIFFERENT CATEGORIES OF FRAUDS
 Documentary Frauds
 Insurance Frauds
 LC Frauds

5. DOCUMENTARY FRAUDS
 Non-existent cargo on a non-existent ship.
 Non-existent cargo on an existent ship.
 Sending rubbish or inferior quality of goods instead of the contracted
goods.
 Shipment date is fraudulently altered or a false date is entered in the
BL.
 Buyer obtains delivery on the strength of a letter of indemnity and
then sells it to an innocent buyer or presents a forged BL to carrier to
obtain delivery without paying for the goods to the bank against
documents.

6. DOCUMENTARY FRAUDS
 Use of fake documentary credits where either the seller and
buyer conspire to defraud paying bank, or the buyer induces
the seller into sending goods on the strength of fraudulent
credit.
 False invoicing of goods to contravene exchange control
regulations, or to pay less customs duty on imports.
 Incorrect description of goods in order to export/import banned
goods, or claim export subsidy on goods or claim
compensation.

7. INSURANCE FRAUDS
 Ship sinks with or without cargo.
 Cargo discharged and sold and the ship sinks.
 False documents. No cargo practically and the ship sinks.

8. LC FRAUDS
 Buyers failed to check on their sellers,
source of products etc.
 When local legal machinery moves very
slow.
 Buyers fell trap into a deal that looks too
good to be true.
 Sellers have no little past track record.
 Sellers pressurize the buyers to close the
deal quickly.
 Sellers request for payment to third party.

9. WARNING SIGNALS
 Pressures
 Unusual transactions
 Excessive payments
 Requests for high degree of secrecy
 Inadequate documents
 Management dominated by one person
 Frequent changes in auditors and legal advisors.

10. WHAT TO DO
 Identify risk areas and build in a system to reduce
 Always identify a reliable partner,
 Sign a reliable contract
 The trader should not indulge in speculative attitudes
 Have an appropriate insurance contract

11. WHAT TO DO
 Deal with a reliable ship owner
 Understand the code of practice UCP 600)
 Make frequent contact with sellers and through
different means and
 Random verification of BL from independent sources