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Due Diligence Thwarts Credit Fraud, TT Club

[ April 22, 2025   //   ]

TT Club, the international freight transport insurer, is raising awareness the increasing prevalence of credit fraud over the last 12 months.

Fraudulent strategies can be extremely lucrative for international criminals and the global supply chain is typically low-risk due to the remote nature of the actual physical theft of goods.

“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,” said Josh Finch, TT Club’s logistics risk manager. Operators are left on the hook for freight costs that can’t be collected, and the losses can quickly escalate.

Methodologies of criminals may vary, but they all prey on operators’ efforts to maximize revenue in a highly competitive commercial environment. As an example, Finch explains: “A new customer approaches with a single shipment, typically to transport internationally, for instance from Bangladesh to Spain. The ocean shipment will be completed by road at source and destination. There is a suggestion this could be the start of a potentially large and lucrative contract.  A rate is agreed and a 60-day credit facility arranged. On completion of the shipment the freight account is settled within the agreed 60 days.”

What follows, from the operator’s point of view seems favorable, as four more consignments of clothing are booked on similar terms to the first. Then the ‘sting’ is put in place as these consignments become urgent and must be sent by air. Several more air freight shipments occur regularly over a three-week period, with all successfully delivered.

After that, customer communications go unanswered, the 60-day credit period expires, and the freight account goes unsettled. The operator is left with significant carrier costs and no revenue.

TT urges operators to engage in extensive due diligence when advancing credit to new customers and points to advice from the British International Freight Association. Based on experiences from members, BIFA highlights similar characteristics of this type of fraudulent ‘customers’:

• Customer wants only airfreight handled.

• No customs clearance or delivery at destination required.

• Completely new contacts, never previously engaged with operator.

• Large volumes of cargo involved.

• Customer accepts the quote without negotiation.

• No record of customer ever importing or exporting previously on the UK’s HM Revenue and Customs Traders website.

“Undoubtedly the best course is to withhold extended credit such as 60 days until a trusting relationship has been established with a customer,” Finch said. “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.”

TT’s Supply Chain Security Bulletin is available at https://tinyurl.com/ywn86smj (page 10).

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