SIGNUM SERVICES – the Club’s private investigators

ITIM Co. Ltd, the managers of ITIC, are a subsidiary of Thomas Miller & Co. Ltd. The Miller group manages a number of other Clubs in the international transport field, including the UK P&I Club and the TT Club as well as UK based mutuals providing liability insurance to barristers, solicitors, housing associations and the trustees of company pension schemes. Signum Services Limited is another company within the Miller group. It has been in existence over 45 years and provides specialist investigation services to the managers and Members of the UK P&I Club, TT Club and ITIC. It currently has a team of four investigators, all ex-senior detectives from the Criminal Investigation Department atNew Scotland Yard. The team has a wealth of investigative experience, which enables it to enquire into incidents world-wide where a Member suspects there is a criminal aspect. The experience gained from their investigations means they are ideally placed to give loss prevention advice to ITIC Members.

This article, in the form of an interview with Signum Senior Investigator, Mike Hawkins, reviews the work Signum do for ITIC in relation to bills of lading fraud.

What are the main problems that ITIC Members encounter?

Attempts to obtain the cargo from the discharge port agent by deception. The main concern focuses on the role of ship agents when releasing cargo. Any failure to comply with the release terms, can result in the carrier becoming liable to the rightful cargo interests. If the agent is responsible then the agent will have to indemnify the carrier.

How do the fraudsters operate?

As the original bill of lading is generally required to secure the cargo’s release, people involved in transit cargo fraud concentrate on this document in one of two ways:

1. falsification of the original bill of lading;
2. avoiding the presentation of the original bill of lading.

What can you tell us about bill of lading forgery?

A bill of lading is susceptible to forgery. Perpetrators are always seeking new and ingenious ways to commit this type of fraud. With the aid of modern technology, it is possible to produce high quality forgeries. In a recent investigation for ITIC, the fraudsters had used commercial photocopying equipment to reproduce a dual-coloured carrier’s bill of lading. The blank form created was completed using a very similar typeface to the one used by the carrier and a careful forgery of one of the authorised signatories. When presented to the unsuspecting agent, the document was accepted as genuine and the cargo released. Only later, after a close examination of the document did it become apparent it was a forgery. The creation of a forged document is a major threat to unwary parties. Agents should be specially alert when an unknown person presents documents, or the circumstances of the release appear suspicious. Application of simple checks can thwart attempts to obtain cargo by this method.

How does cargo get released without presentation of the bills of lading?

Enquiries into the circumstances of such a release generally find that the agent has either been deceived or, more often than not, shown a serious lack of judgement, frequently involving their working relationship with the cargo receivers. A typical example involved a branch office of an agency company. The agent was required to release ten containers of sugar to the consignee against presentation of the original bills of lading. The proprietor of the consignee and the manager of the agent’s office had known each other since school and had a good relationship. Unable to make the payment to obtain the bills of lading, the proprietor of the consignee arranged with the agent for the release of the cargo on the acceptance of his personal guarantee.

With the shipper being unaware of this, further containers were forwarded and released by the agent’s staff on the same terms. Later when the shipper sought information about his cargo, the agent deceitfully failed to disclose what had happened. As the consignee could not meet his financial commitments, the agent was held liable for the unauthorised cargo release. The personal guarantee was worthless. The finances of the proprietor of the consignee were the same as his company. During one investigation an agent commented that Signum Services Ltd worked in an ideal world, while he had to work in the real world and that on occasions, a bad business decision was made. This excuse is used to defend improper actions or to assuage guilt. What in fact happens is that the agent, for whatever reason, decides to ignore his legal obligations to his principal and without justification, acts in the interest of a third party.

In your example, the agent accepted a personal guarantee which proved worthless. What other documents are used to persuade agents to part with cargo? Two common examples are indemnity letters from the consignee and letters from third parties such as banks. These ultimately do not however, offer any security. One case involved both of these factors. An agent was required to release four containers of electrical goods against presentation of the original bill of lading. Personally knowing the consignee, who had a good business reputation, the agent released the cargo on the presentation from the consignee of a letter exonerating him from his actions. This was supported by a letter from the consignee’s bank confirming that there were sufficient funds in the account at that time. When the shipper demanded payment for the goods the funds had been withdrawn. The letter from the bank was not a guarantee. The bank was neither liable to pay nor under any obligation to ensure that funds remained in the account. The bank had merely advised what was in the account on that day. As security, both the bank letter and that of the consignee were worthless. The agent was responsible to his principal for the value of the goods. Another common ploy is for the consignee to claim that the shipper has authorised the cargo release. One case involved an agent who accepted written confirmation of the shipper’s agreement from the consignee. The agent did not obtain separate confirmation from the shipper. The cases you have discussed are all matters that discharge port agents should be aware of. Do you have any experience of problems at the loadport? The most common problems are agents placed under pressure to issue bills of lading which are inaccurate. An example would be pre-dating a bill of lading. Agents must appreciate that issuing a document which they know to be false is fraudulent and they can be held liable for the consequences. We were asked to trace a shipper who had left the agent in possession of 10 containers of cargo which needed specialist disposal. The original shipment was cancelled after arrival of the containers at the port. The agent’s own enquiries could not locate the shipper and eventually the decision was made to dispose of the cargo to recoup the storage charges that had accrued. On examination rather than the bland description used on the booking, it was found that the containers contained out of date medical supplies. This, for hygiene reasons, required specialist and expensive disposal by licensed contractors to landfill sites at a cost of many thousands of dollars.

Signum traced the individual who had shipped the cargo and the agents were able to recover the costs incurred.

How can Signum be of help?

Signum is always available to offer advice or help to Members if they have any concerns or experience a problem. Members should channel any requests through their ITIC account executive. The most common problems are agents placed under pressure to issue bills of lading which are inaccurate. An example would be pre-dating a bill of lading. Agents must appreciate that issuing a document which they know to be false is fraudulent and they can be held liable for the consequences.

Mike Hawkins