Maritime Fraud, Types, Costs, and Ways to Combat Smuggling
February 27, 2023
Maritime fraud is common and can occur virtually everywhere, from warehouses and company offices to onboard commercial ships. The trafficking of illicit or unmanifested cargo involves the smuggling of prohibited articles by suppliers, stevedores, agents, surveyors, and even ship superintendents, senior deck officers, and engineers. Such smuggling of cargo exposes carriers to reputational, financial, and legal risks and is a serious problem both, at land and on sea.
Types of Illegal Cargo
Vessels may carry cargo that fraudsters want to keep undetected. Such items include products that are adulterated, counterfeited, or falsified, including construction materials, electronics, alcohol, and pharmaceuticals. Criminals attempt to keep a wide range of illicit items under the radar, from engine parts to food and toys. The types of cargo shipped without documentation include dangerous goods like ammunition and weapons as well as fish, exotic plants, chemicals, and hazardous waste. By volume, the highest percentage of illegal cargo seized by port authorities includes:
- Cosmetics and perfumery
- Food
- Footwear
- Games and toys
- Handbags and articles of leather
- Medical, photographic, and optical devices
- Electronics and electrical machinery
- Crocheted and knitted clothing
- Jewelry
- Watches
Ways Criminals Smuggle Illegal Cargo
Criminal groups use a variety of ways to smuggle cargo onboard ships, including planting workers within logistics and manufacturing businesses, hacking into computer systems at ports and logistics companies, faking seals on boxes and containers, and unloading cargo while in transit to replace it with illegal items.
Why Smuggling Occurs
No country has the resources and manpower to investigate and completely prevent the smuggling of prohibited items. Customs officials have many responsibilities and are struggling to balance between inspecting and monitoring cargo, assessing duties, and expediting processing. A close and thorough inspection of all cargo can cause long delays which can lead to supply chain disruptions. Identifying prohibited cargo can be difficult, rendering thorough review non-cost-effective. Moreover, the large volume of containers shipped globally makes identifying prohibited items challenging. A single vessel may carry thousands of containers. And while progress has been made in identifying counterfeit and dangerous items, criminal groups are constantly finding new ways to evade inspection and detection of prohibited cargo.
Costs
Illegal cargo costs governments huge revenue losses due to products being shipped for sale on the black market. The trade in pirated, counterfeit, and dangerous goods harms economic growth, drives corruption, and puts citizens’ safety and health at risk. The smuggling of illegal cargo threatens political stability by undermining citizens’ trust, the rule of law, and public governance.
What Can Be Done
Sea ports have an important role to play in identifying prohibited cargo. Some port authorities, for example, have established wildlife traffic monitoring units to inspect and detect the unauthorized shipping of wildlife. Also, the use of advanced technologies for risk assessment can help improve the reliability and quality of information. Another example could be freight forwarder organizations such as the International Forwarding Association, ship operators, and major brands cooperating to establish guidelines that help improve awareness of the importance of collecting thorough and reliable information about businesses and third-parties shipping cargo.
