Taking A Bite Out Of Cargo Fraud

     Later this year comes the fourth IATA Cargo Loss & Claims Conference (CC&L) September 17-September 19, 2008 in Bangkok, Thailand at Royal Orchid Sheraton Hotel & Towers.
     In an era of runaway fuel and slimming margins, loss control due to claims or theft or simple lack of information and procedures to properly analyze and determine shipper claims, is taking on a separate and growing importance.
     The IATA CC&L initiative brings together some of the best and brightest experts for a couple of days of meetings, presentations and brainstorming around a common challenge.
     Jeff Hinton is a Singapore-based Senior Liability Claims Adjuster at Charles Taylor Adjusting Ltd, a UK company that used to be called Lloyds Aviation Department.
     Here Mr. Hinton tackles the challenges of loss prevention in air cargo head on.
     “The majority of air freight transported comprises of specialist machinery (especially electronic goods including computer ware) telecommunications equipment, medical and pharmaceutical products, textiles, food stuff, perishables and photographic equipment.
Fraud By Numbers
     “In weight terms the largest export commodity is miscellaneous (15%) and other electrical machinery (15%).
     “For imports the most important categories by weight are fruit and vegetables (13%), photographic equipment (11%), travel goods (8%), telecommunications and audio equipment (9%), office machinery (5%), general industry machinery (10%) and metal working machinery (5%).
     “Clearly the wide diversity of goods handled by air cargo exposes the industry to potential problems and fraudulent claims.
     “The impact of fraud can be very significant in terms of monetary value and to the operation and reputation of the air cargo company.
     “Fraud can be perpetrated both internally and externally so it is important to focus on the problem and identify and try to mitigate fraud risks.
     “On average it is estimated that airlines lose at least USD$3,000.000.00 each in fraud a year.
     “When it comes to the problem of internal fraud, cargo theft is still regarded as one of the most costly to the airline.
     “Cargo theft still remains a problem especially with the high increase in the amount of electrical components often transiting from the Far East which, unfortunately are quite easily identifiable by those perpetrators despite packaging methods often used by shippers to try to disguise the identity of the consignment being transported.
     “There are still quite a large proportion of airlines that have no fraud policy.
     “A lot of the airlines have no anti fraud program, no “whistle blowing” mechanism that would allow staff to report any known or seen fraud.
     “There are important factors that air cargo companies need to look at and that is a system to track fraud and perform a risk assessment to govern a problem that can work out to be expensive.
     “There is a growing consensus that the level of fraud is going to increase rather than decrease.
     “In a recent survey that was performed by Deloitte some airlines were asked how they discovered fraud.
     “Amazingly up to 31% of the airlines only discovered fraud by accident!
     “We at Charles Taylor Adjusting have become involved in a number of investigations of fraudulent claims, the most common of which appears to have been notification of damage occurring prior to the custody and control of the airline and/or their handling agent, the loss of goods notified after delivery to the eventual consignee and lastly the collection of goods against fraudulent documentation.
     “Indeed Charles Taylor were involved in a detailed investigation concerning the collection of goods in London against a banker’s order/draft later to be discovered as a fraudulent document.
     “We liaised with the Police Authorities where enquiries revealed a “trend” and the emergence of a gang perpetrating this and many other similar losses.
     “Charles Taylor has also been part of detailed and often high profile loss situations including thefts and armed robberies that unfortunately sometimes are attributable to “employee interaction” where they are indirectly involved in incidents.
     “Examples of that are the armed robbery awhile back at London Heathrow, or the well publicized theft of currencies and diamonds at Brussels International Airport.
     “Unfortunately the trend going forward is not good and whilst preventative measures can be put in place they are never going to totally eradicate the problem.
     “But there are things everyone can do to minimalize loss damage.
     “As example early investigation of a suspected claim including the analyzing of documentation and the interview of people is essential together with the utilization of survey of goods/consignment where applicable. “Also the implementation of an anti fraud program whereby fraud risks must be assessed regularly and a proven scheme implemented such as an early warning detecting systems and “whistle blowing”/”speak up” mechanism so that anyone who suspects fraud knows how to speak up and where to go.”
Geoffrey