IMB identifies suspicious cement transactions

Requested to conduct due-diligence investigations on behalf of its members, IMB discovered that a number of parties are offering cement trades at prices well below market value.

IMB Director Pottengal Mukundan stated: “Given the recent construction boom and the rise in fuel prices, the price of cement, as with many other commodities, has increased sharply. This steep rise in demand for cement has created a window of opportunity for unscrupulous operators.”

By offering very attractive terms in a highly competitive market, scam operators have been able to persuade buyers to open Letters of Credit in their favour. Generally, purveyors of this kind of financial fraud are employing a strategy that will allow that opportunity to obtain cash upfront and quickly.

Mr Mukundan stated: “A number of the recent cases reviewed include offers of goods originating from countries that do not currently export the specified commodity in the packing described. The proposed prices averaged approximately 25% lower than current market prices. In addition, the offers did not come from established or well known traders of these goods. These elements combined to raise our level of concern regarding recent cement transactions.”

As part of routine due-diligence checks on behalf of its membership, the IMB uses its network of trading contacts to verify the price of commodities and advise members on the feasibility of a proposed transaction. In addition, the Bureau frequently conducts background checks to review an individual or company’s trading record.

The IMB recommends that stringent due diligence checks are undertaken on all parties involved in any major transaction, even those parties with established trading records. At the very least, banks and buyers should be establish that the proposed beneficiaries are able to provide the noted commodity at the stated price.