Freight forwarders are being conned by criminals into granting extended credit on international shipments and leaving them with significant carrier costs, an insurer has warned.
TT Club said credit fraud had become prevalent over the last 12 months and it urged companies to do their due diligence and avoid offering extended credit until a relationship with a new client had been properly established.
The insurer said methodologies varied, but they all preyed on the priority of operators to maximise revenue in a highly commercial environment.
TT Club’s logistics risk manager Josh Finch described a scenario in which a new customer approached a freight forwarder with a single international shipment.
A rate is agreed and a 60-day credit facility arranged. The shipment is completed without incident and the freight account is settled.
More consignments follow, but the ‘sting’ is put into place as these shipments become more urgent and volumes increase before communications go unanswered, the credit period expires and the account goes unsettled, leaving the operator with significant carrier costs and no revenue.
“Credit fraud is an exposure to all in the global supply chain and a danger that ought to be considered through the risk management structure of every business,” Finch said.
“This is primarily a financial risk as operators are left with freight costs that can’t be collected. The losses as a result of such fraud can escalate quickly.”
The British International Freight Association has highlighted characteristics shared by fraudulent customers, which include them wanting only airfreight handled, no customs clearance or delivery at destination required, large volumes of cargo involved and the customer accepting a quote without negotiation.
Finch added: “Undoubtedly, the best course is to withhold extended credit such as 60 days until a trusting relationship has been established with a customer.
“If commercial necessities dictate offering a more immediate credit facility then careful due diligence is vital.
“It is wise to maintain that primary risk management revolves around knowledge of your customer at all levels including regulatory compliance, safety, and security.”
Chris Tindall started writing for the haulage and logistics industry in 2002 and quickly realised there was enough going on to keep him busy for a very long time.View full Profile
