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International Trade Frauds: Keeping the Criminals at Sea (From Combating Commercial Crime, P 121-138, 1987, Rae Weston, ed. -- See NCJ-115833)

NCJ Number
R Weston
Date Published
18 pages
This paper examines and suggests countermeasure for the following types of international trade frauds: scuttling, deviation, and cargo theft; arson; charter-party fraud; cargo insurance fraud; and documentary fraud.
The scuttle fraud typically involves the seizure of a cargo and the deliberate sinking of the vessel. The cargo, vessel, or both are usually heavily insured. Steps for preventing such fraud are to verify the status of the other party to the contract (importer or exporter), check to see if the vessel contracted to carry the cargo actually exists, and determine if the ship is in the port where it is supposed to load and enlist a third party to confirm that the cargo has been loaded on the specified vessel. Other preventive measures are to check that the ship follows its scheduled route and to inspect the cargo upon loading and discharge. Regarding arson, prevention should include the institution of methods for detecting, extinguishing, and suppressing ship fires. A typical fraud involving a time charter party involves a charterer arranging an agreement between a shipper and a consignee for the delivery of goods by sea at below market rates. The charterer makes the down payment and perhaps one installment and then vanishes with the rest of the money obtained from the shipper. A preventive measure is to use only reputable shipbrokers to check on the backgrounds of time charterers. Cargo insurance frauds usually involve the insurance of cargoes far above their true value and can be prevented by inserting a classification clause in insurance policies. Documentary or letter-of-credit frauds can be prevented by tracing the path of the involved goods and verifying transaction documents. 23 references, 28 footnotes.