Email & Cyber Fraud

Email and Cyber Fraud
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ITIC'S Senior Account Executive, Robert Hodge, discusses Email & Cyber Fraud.

Human Error

Human error and fraud are linked. ITIC have been ensuring professionals in the transport sector for many years and actually we're having our 25th anniversary this year, but our roots go back to 1925. And the companies we've been ensuring: ship brokers, ship agents, ship managers, we found that the same mistakes are made time and time again.

Fraud is one of those claims that we do pay when a company we insure is hit by a fraudulent act. And over the decades fraud has occurred, but the style of fraud has changed. One of our main categories of members is ship agents.

Ship agents hold the key to the warehouse, what is known as the bill of lading. The bill of lading is a very valuable piece of paper, but it's also very easy to have fraud around the bill of lading, because of its value. A ship agent may be presented with a forged bill of lading and then they release the cargo against that bill. The human error there is that potentially the ship agent is doing a lot of bills lading work on a day-to-day basis and they don't do the proper checks and balances to make sure that bill is not forged.

That can lead to an extremely expensive claims upon the owner and then from the owner to the agent. Some cargos are worth millions of dollars, such as oil or containers on a

How has fraud evolved?

ITIC is still seeing fraud, but rather than just having fraud in forged bills of lading, we are now seeing a change into fraudulent diversion of funds. So we ensure ship brokers, ship agents and ship managers and they all hold client funds. And in some circumstance, if a ship broker is holding hire for an owner, that could be millions of dollars. If a ship manager is holding owners funds for the vessel for the operation expenses, again that can be millions of dollars and a ship agent also holds cash to master or other funds on behalf of the vessel.

What's happening is the fraudsters are aware that a transaction’s about to be made for example the ship broker is about to pay the owner his hire or the ship manager is about to pay a supplier or a service provider, for instance, refitting of the vessel or repairing the lifeboats. And again ship agents may be sending cash to the master and somehow the fraudsters are aware a transaction could be made and they swoop in with a fake email.

It's actually very surprisingly easy to create a forged email address. Anyone can do it. You can go off and set up a new email domain name, but you just have to change slightly the correct e-mail address by adding another letter or a number or the suffix at the end from .com to .gr or and then they'll send in an email to the ship broker or an agent saying: “Sorry, the bank details we gave you last week have changed. They've been changed because our banks closed due to auditing reasons. Therefore, please find attached new bank account details and make payment to that.”

It's surprisingly very simple, but it happens a lot at the moment. We're seeing weekly notifications of this type of a loss. The member would then pay the funds to the new account and once they're paid away, it's very rare that you get them back, because once they've been paid to that account, they'll be withdrawn and that account will be closed down and they'll be circled again and again to hide the money.

How do we prevent e-mail fraud?

So a simple way to avoid these fraudulent diversion of payments is to pick up the phone and phone your usual contact within that company. Don't phone the mobile number or the number in the email you've been provided because undoubtedly that will be supplied by the fraudster and you'll be speaking to the fraudster. So go into your contact database, get the number of the person within that company and phone them and double check that those bank account details are correct.

What should we do if we are victims of email fraud?

So what you should do if you are hit by this type of fraud is immediately contact ITIC and tell us about it. We'll open up a claim and we'll try and give you some advice on how to try and get those funds back.

Unfortunately, once you've lost these funds into a fraudulent bank account, they're very difficult to get back. However, within Thomas Miller, we have Signum and Signum is specializing at the moment in these type of losses and you can try and recoup them via that way. If not, then unfortunately you may be facing a claim of negligence from your principal.

Therefore ITIC will try and defend that and if we can't then we will reimburse your principal the lost funds.

Staff Author

Thomas Miller Group