Shipping Documentary Fraud

We are all aware of what a Bill of Lading looks like, and the important role it plays in international trade as proof that goods have been loaded on a ship, as a document of title to those goods, and as a form of security. We are also probably aware that in our own offices there are drawers full of blank Bill of Lading forms of various types, any one of which could be typed up, signed, stamped “ORIGINAL” and would be indistinguishable to the unpracticed eye from a genuine Bill representing real cargo. How are we expected to know that the signature is NOT that of the Master or his Authorized Agent?  The ease with which documents in shipping business can be forged, altered, fabricated or otherwise adulterated is not lost upon the criminal fraternity. Giving rise to a series of fraudulent documents presented to Banks in support of Letters of Credit or to Shipping Companies for release of cargo or to innocent individuals as documents of title, all of which are calculated to obtain funds or goods by deception. Other areas of Fraud:  Major incidents of fraud tend to make the headlines, but there are far more frequent incidents, which may never be detected. Even though the figures involved may not be spectacular they are nonetheless damaging to the business of shipping and collectively amount to millions of dollars a year. As many liner operators are aware, shippers are frequently tempted, when booking cargo, to “under-measure”, thereby reducing the volume of their cargo upon which they will eventually pay freight. In some cases this will only be discovered by sharp- eyed deck officers during loading operations, or if the company carries out spot checks on the dimensions of cargo delivered to the port in advance of shipment. Such fraudsters are trading on the fact that their under-declaration will not be noticed, and that even if it is they will simply claim that this was an innocent error. The cost to the carrier of carrying out such checks of course eventually rebounds upon the innocent as well as the guilty. In this way it can be seen that the victims of fraud are not simply those who are the prime target of dishonest behavior but the wider shipping community. Another example, in which parties may collude quite innocently, is the so-called “Letter of Indemnity” or “back letter” issued by a disreputable shipper of cargo to a Master or his Owners in exchange for a clean Bill of Lading. If, let us say, a cargo of chemicals in drums on pallets is loaded, and the Chief Officer of the ship notices that many of the drums are second hand, rusty, dented and leaking; the Master is unlikely to sign a Bill of Lading without insisting that it should bear a clause to this effect. If he does not, he and his Owners can be held responsible for the condition of the drums upon discharge. In order to secure a ‘clean’ Bill of Lading to obtain full payment from the consignee (whether through a letter of credit or otherwise), the shippers may offer to indemnify the Master and Owners against any claim for damaged cargo, issuing them a letter accordingly. This may indeed protect the owners from any subsequent claim, but it has the effect of giving the shippers a Bill of Lading, which mis- represents the condition of the cargo. The Bank, or the consignee, or an innocent third party may then be induced to part with payment for the cargo as described in the Bill of Lading. Had they been aware that it was in fact in leaky, rusted, dented second- hand drums they may well have decided not to do so, and are thereby the victims of a fraud.