History of fraud is almost as old as human civilization and some elements of society find it effective and shortest route to acquire wealth and indeed maritime trade is no exception. The worldwide traders as well as attorneys are facing the new challenges in the area of Maritime disputes due to such frauds. Destructive mind equipped with the modern technology make them more lethal and effective.
Fraudsters are not restricted themselves in particular areas but showing their skills in all department/ segments of maritime trade which not only threat to business harmony but create distrust amongst the traders. Some common types of frauds are as follows:
We are explaining few prominent cases
These frauds can come in many different forms. It can involve the sale of cargoes that do not exist, fraudulent misrepresentations on Cargo Documents, the attempt to illegally claim on Letters of credit, fake letters of Indemnity, as well theft of cargo and/ or cheating over quantity and quality. Following are the illustrations; Cases are:
The key here is usually the involvement of unknown or numerous intermediaries and an overly trusting approach to representation made by or on behalf of first time counterparties.
This is witnessed in the Time charter case in which the vessel is let out to the Voyage Charterer. Due to the numerous of intermediaries acting on behalf of the parties in the Time charter and the Voyage Charter , the commitment of fraud (like misrepresentation) by any of the broker or the party gets easy with the help of the latest technology.
Due to the misrepresentation by the shipping broker of the Shipping Company, the port fees is paid in advance by the party and later it comes into the knowledge that no such shipping agent existed.
The investigation report says that the alleged broker and the alleged charterer usually is run by the same person out of different e-mail and phone accounts.
Intercepted FreIght Scam
In this case, due to the long chain of intermediaries, who do not know each other, the ultimate victim meant is to be only the initial charterer; losing their freight and not able to track the actual fraudster behind it.
“pre-planned deFault”
In this case, once the bills are issued, however, and the freight is paid by the Shippers, the charterer then disappears from the scene, leaving the owner with no revenue but a cargo that still has to be delivered under issued bills.
In some parts of the world, Vessels are at risk of Fraudsters seeking to use a vessel’s call to port as an opportunity to obtain payment for services and goods that were never provided.
In this scam, Fraudsters can come armed with invoices for alleged Shipping Agents related activities and/ or supplies to the vessel which were never performed or delivered. They will present themselves as a local Shipping Agency that undertook work on behalf of the vessel and Master.
Fraud can have legal consequences in both Civil and Criminal courts. For instance an attempt to make a fraudulent insurance claim can allow the Insurer to deny the claim while at the same time expose the Claimant to the risk of being prosecuted in the criminal courts for their attempt to defraud the Insurer.
Equally a fraudulent transaction, say by use of fake Bills of Lading and/ or letters of credit, can attract both civil action by the victim to recover their loss as well as criminal proceedings brought by national bodies such as the Serious Fraud office in England or the Department of justice in the United States.
Under the English Law and Indian law, defines the Fraud and the liability of committing such fraud by any person.
As the cost of being a victim of the fraud may include;
The key to preventing being a victim of fraud is vigilance and deal with the known parties whether it is shipping agent or charterer or other partners. Being alive to risks, taking due care to prepare and then ensuring diligent follow up, will mitigate against the worst and help to ensure that business reputations and profits are protected. Attorney finds it difficult to catch hold the real culprit in the entire transaction as no intermediaries or the parties accept the error on face of the bills or receipts at the port and the liability arising out of it.
The Indian parties opt for the Arbitration as agreed between the parties or file a suit in the Admiralty Court to claim the loss or damages incurred to ship at the respective ports. The court takes time to decide such cases as the parties take time to file and prove their defences due to which the innocent party incurs loss due to the non delivery of the perishable cargo and the price reduction of such cargo. Hence, the Attorney plays a vital role in guiding their hipping clients before entering into any Marine Transaction like due diligence etc.
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