[060816.EN.BIZ] Customs Brokers Face Risk of Fraud Charges For Giving Advice: Insurer

CUSTOMS brokers can be exposed to legal liability and accused of negligence if not fraud for providing advice to customers, say British TT Club insurers.

As a result, there is the potential to provide advice to customers or carry out actions that result in the cargo interest suffering financial loss, for which brokers can be alleged to have been negligent, warns the TT Club.

Closely related to the liability exposure of the broker's customer is the potential for customs to levy fines or penalties through infringement notices.

"Identity fraud is perhaps a less obvious area of risk. In some cases authorities find that brokers have committed an offence where checks on the identity of clients have not been performed and that simple verification of the identity would have alerted the broker to the fraud," said senior claims executive at TT Club in Sydney, Kate Hollis.

Ms Hollis said that customs brokers also need to be aware of the risk of identity theft. While the variety of scams is broad, TT Club has identified three areas that require particular attention for customs brokers:

1) Piggybacking - where an unscrupulous entity uses the identifying details of a legitimate entity on a cargo report or import declaration, generally with the aim of importing consignments containing illicit substances or smuggled goods.

2) User access security - the nature of access to customs entry systems and digital certificates means that individual login details need to be carefully guarded to avoid misuse and illegal activity.

3) Mandate fraud - where fraudulent diversion of payments occurs. It is primarily the responsibility of the party making a payment to ensure that the bank details are correct.

"Customs brokers should be aware that their licence might be at risk in a situation where the authorities consider that the broker has intentionally or recklessly facilitated a fraud. Such situations can also lead to fines being imposed on the customs broker as an individual, as well as actions against the forwarding business as a company," said Ms Hollis.

"Mitigation of these risks is possible. In the first instance, it is important to review your own internal processes and systems. Recognise that the risk exposures are business critical and implement robust technology systems and standard operating procedures accordingly, particularly considering access rights and controls."

She continued: "Ensure that well drafted standard trading conditions are properly incorporated into your interactions with all clients. Many national trade associations provide ideal models. You should seek legal advice to ensure that contracts are appropriate for your specific business."

Source : HKSG.