Coordinated checks aid fraud detection

Each theft involved fraudulent documents containing many similar mistakes. The frauds were not immediately identified, since the different banks were not aware of the related fraudulent transactions and the links between them.

According to the head of IMB Information Services, Sam Mwedekeli: “Such attempted ‘fraud by numbers’ scams rely on timing and count on the fact that banks do not generally share information with each other. This lack of coordinated data increases the chances of success for the fraudsters even when, as in these cases, there are large and glaring mistakes in the documentation.”

Last summer, a bank based in Israel asked the IMB to investigate a urea cargo fraud perpetrated against it. The IMB found the documentation contained a number of basic errors that would have quickly identified the fraud. However, the errors were not picked up until after $1.6 million had been paid against a letter of credit. In addition to the unusual origin of the cargo and a misspelling of the carrier’s name on the bill of lading, the most obvious mistake was that 12,500 MT of bulk cargo was allegedly loaded onto an 186GRT tug.

A similar fraud perpetrated at another bank at approximately the same time, used a matching modus operandi and documentation. Another cargo of urea was involved, allegedly bound for an African nation this time.

At around the same time, the IMB also identified two other shipments of steel from Ukraine to UAE and Vietnam respectively where the goods did not exist. The documentation described the break bulk steel cargoes as being loaded on container vessels that were not in fact docked at the stated loading port. In each fraudulent scheme the bills of lading employed used the same fake stamp and style of font, sufficient proof to link each scheme to the same group of individuals.

These frauds, noted Mr Mwedekeli, highlight the multiple benefits of working with organizations that specialize in investigating financial transactions and network closely with a number of banks. “The IMB verifies a large number of trade finance documents from around the world. We are well positioned to identify such scams and raise the appropriate alerts,” said Mr Mwedekeli.

He commented: “The more information banks provide to crime prevention experts, the quicker a repeat scam becomes apparent. Experts can readily identify trends in fraudulent activity and can warn financial institutions of what to look out for before any funds are committed. This kind of protection saves financial institutions from shelling out significant funds in respect of spurious transactions.”

Mr Mwedekeli added: “One benefit of IMB membership is the immediate alerts that members receive after evidence of such a fraud comes to light. This service proved quite valuable to two of the banks targeted in this scheme already holding IMB membership. Unfortunately, the other banks were not able avoid these frauds.”