Business, Freight News

Customs brokers at risk from fraud, warns TT Club

[ July 29, 2016   //   ]

Customs brokers and freight forwarders have to perform a delicate balancing act between providing services to clients and complying with obligations to customs authorities – and it is getting more complicated, warns the TT Club.

The insurer’s senior claims executive in Sydney, Kate Hollis, explained: “Customs brokers assume responsibility for acting correctly between cargo interests and customs. As a result, there is the potential to provide advice to customers or carry out actions that result in the cargo interest suffering financial loss, for which you can be alleged to have been negligent. Closely related to the liability exposure of your customer is the potential for customs to levy fines or penalties through infringement notices.”

Another, less obvious risk, is identity fraud Hollis added: “We recommend dealing with your clients directly (rather than through an intermediary) and always perform your own background checks, both in regard to the entity itself as well as the statements being made to customs.”

In a recent incident, rice wine imported into Australia from Korea was declared as apple cider vinegar. This directly resulted in extra costs for handling the container and for storage costs under the customs bond. Following the inspection, duty was charged at the rate for rice wine – not cider – which the freight forwarder pre-paid on behalf of the importer. It proved impossible to reclaim the duty and additional costs because it transpired that the consignee company no longer existed. There have also been cases of people fabricating an identity in an attempt to import goods without paying the full amount of duty. When the companies were not successful, they simply disappeared.

“Customs brokers also need to be aware of the risk of identity theft, in particular ‘piggybacking’ – where an unscrupulous entity uses the identifying details of a legitimate entity on a Cargo Report or Import Declaration, generally to import consignments containing illicit substances or smuggled goods.

Individual login details need to be carefully guarded to avoid misuse and illegal activity. To prevent mandate fraud – fraudulent diversion of payment – it  is primarily the responsibility of the party making a payment to ensure that the bank details are correct.

Hollis added: “Customs Brokers should be aware that their licence might be at risk in a situation where the authorities consider that the broker has intentionally or recklessly facilitated a fraud.  Such situations can also lead to fines being imposed on the customs broker as an individual, as well as actions against the forwarding business as a company.”

It is important to review internal processes and systems and implement robust systems and standard operating procedures, specially for access rights and controls.

Also ensure that well drafted standard trading conditions are properly incorporated into interactions with all clients, seek legal advice to ensure that contracts are appropriate and purchase adequate and appropriate insurance.