Maritime Fraud

Fraudulent practice in one form or another is, sadly, common to many areas of commerce, and imposes a considerable cost on the law-abiding community in terms of losses directly attributable to fraud and the price of precautionary measures taken to try to prevent it. Shipping business, by virtue of its international nature, is the perfect vehicle for a number of fraudulent practices, which tend to take advantage of the high degree of trust upon which the industry depends. Maritime Insurance Fraud:  Frauds perpetrated against Insurance Companies are not limited to the Maritime field. A recent court case highlighted the problem of airline travelers, who could obtain low-cost insurance at airports with a minimum of checks against loss of luggage in transit. Then making regular spurious claims against a number of policies with different companies for the loss of their suitcases, which invariably seemed to contain a large number of Armani suits, hand-made shoes and tailored shirts. As each claim was relatively low in value, and insured with a wide variety of companies, few questions were asked and the claims paid out in good faith. It was only the vigilance of one claims assessor which showed that one traveler appeared to have lost his luggage on upwards of fifty flights a year and was fraudulently relieving the insurers of sums in excess of $ 200,000 per year. Unscrupulous shipowners, in league with dishonest merchants, have been known to over-insure a ship and its cargo and subsequently arrange for it to sink in bad weather in a remote location, claiming far more than the ship or its contents were worth. The celebrated case of the tanker “SALEM” which loaded a cargo of crude oil in the Arabian Gulf for Europe, illustrates a large-scale fraud which almost succeeded. Under the name “SOUTH SUN” she loaded 195,000 tonne of crude oil in Kuwait for an innocent Italian charterer in Genoa. On passage through the Indian Ocean the vessel’s name was quietly changed to “LEMA”. She anchored off Durban and discharged her cargo (which had since been sold to another oil company for $56 million) illegally, refilling her tanks with seawater to give the impression of being still fully laden. Continuing on her illicit voyage, now under the name “SALEM” she mysteriously sank after an explosion off the coast of Senegal. Had it not been for the fact that the officers and crew, when picked up from their lifeboats by the rescue services had their suitcases with them, the intended claim for the loss of the ship and her now non- existent cargo might well have been met. Insurance companies of course have their own investigators to make inquiries into any suspicious losses, but even though they may save their underwriters from fraudulent claims, it may be difficult to track down and prosecute the perpetrators. Insurance frauds are not, as some dishonest parties might claim, “victim-less” crimes. The insurance companies and their underwriters may eventually recover their losses through the premiums paid, but the burden is borne at the end of the day by all those who take out insurance and deal honestly with their business.