While there may be valid trading reasons that give rise to bill of lading difficulties, there is an unhealthy under-belly of criminal activity.

TT Talk canvassed some trading issues relating to bills of lading in the December 2018 edition. Reference within those articles was made to the English law position articulated in Motis Exports case¹,  explaining the risk exposure to bill of lading issuers and stakeholders relying on the documentation. This article applies to the industry vulnerability to fraudulent activity.

Banking scrutiny

The International Chamber of Commerce's Commercial Crime Services division has a primary function of protect the integrity of international trade by seeking out fraud and malpractice and providing reports based on this activitiy to its members.

Commercial banks commence thousands of investigations each year in relation to fraudulent bills of lading which are undertaken by the International Maritime Bureau (IMB), a division of CCS. Through the investigation process, IMB conducts due diligence on all trade documents, including bills of lading, and seeks independent third-party verification to provide an extra level of confidence in transactions. This supports banks in relation to their compliance procedures to prevent fraud, money laundering and sanctions breaches.

Suspect bills of lading are those which have false content including the wrong ship, dates, description of cargoes, container numbers or parties. Perpetrators present such bills of lading to banks to facilitate fraudulent activity including money laundering, fraud, illegal capital flight and to by-pass sanctions.

NVOCC vulnerability

From this work, IMB estimates that over 95% of all improperly issued bills of lading are issued by NVOCCs. This is a staggering finding, albeit relating to a small percentage of the total transactions, but a clear indicator of the vulnerability of some elements of the NVOCC sector.

"IMB estimates that over 95% of all improperly issued bills of lading are issued by NVOCCs."

It is recognised that NVOCCs and freight forwarders play a vital role in international trade and whilst the majority operate to extremely high standards, there are inevitably those who for a variety of reasons may deliberately or recklessly issue bills of lading with false content. It is important that safeguards are in place to ensure the security of bills of lading and that there are systems in place to track any misuse.

As a result of recent trends involving bill of lading fraud and a growing concern of their stakeholders, the IMB developed a new initiative, unveiled at Enterprise, Singapore on 15 January 2019, during a panel discussion on the manipulation of bills of lading attended by over 100 delegates from banks, logistics companies and lawyers. The primary objective is to provide a common open platform from which to improve anti-fraud standards and to give due recognition to participating NVOCCs who adhere to the minimum standards established within the platform.

Announcing IMB NVOCC register

The initiative introduces an open source NVOCC register  in conjunction with a new IMB Code of Conduct which all participating NVOCCs are required to adopt. The Code of Conduct is supported by an online training course  which sets out minimum standards for the issuance of NVOCC bills of lading. Participating NVOCCs remain accountable where a document they have issued is found to be fraudulent, however it is anticipated that a wider knowledge of good practice will result in fewer cases of fraud being identified.

Maintaining the integrity of the bill of lading is of paramount importance to all stakeholders in global trade. Where fraudulent activity is allowed to continue, there is a real danger that key stakeholders de-value the worth of the bill of lading. Inevitably, should the industry not be able to address commercially the challenge presented by the use of fraudulent documents, there is a risk that regulations may be required. This initiative recognises and seeks to address this industry wide challenge, seeking to promote awareness and support compliance with acceptable trade practices.

"Maintaining the integrity of the bill of lading is of paramount importance to all stakeholders in global trade"

TT Club believes that this initiative to improve standards and reduce potential exposures to fraudulent activity through the supply chain is beneficial to the industry and would therefore encourage its NVOCC membership to evaluate the platform and consider participation in it.

We gratefully acknowledge the assistance in the preparation of this article of Pottengal Mukundan, Director, International Maritime Bureau, ICC-Commercial Crime Services

¹ Motis Exports Ltd v Dampskibsselskabet AF 1912 & another [2000] Lloyds Rep 211 (CA)

We hope that you will have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club