UPDATE 22 APRIL 2016

Further to our advices below, we have received another alert from the International Transport Intermediaries Club (ITIC), a specialist professional indemnity insurer for the transport industry, which shows that the fraudsters continue to find different and elaborate ways to deceive clients in the marine industry.

The full circular is available here, but the ITIC specifically advise:

“Rather than try to divert the payment being made by the owner the fraudsters attempted to get the agent to send them the money. The owners had sent a message to their port agent advising of “cash to master” payments they were going to make to the agent’s account for subsequent delivery to the ship. The money duly arrived but almost immediately the agent received a message saying that the payments were not required and could the agent return the funds. The message included the account details for the repayment. Fortunately the agent was concerned about the message and telephoned their principal to check. The fraud therefore failed but it is unlikely that this will be the only use of this particular technique.”

We urge our clients and partners in the industry to implement procedures to check any changes to bank account details, or instructions to divert funds, with their counterparts to avoid the possibility of being the victim of a fraud which, in most cases, is unrecoverable from a standard insurance programme.

INITIAL ADVISORY

An owner’s bank account for payment of hire was changed fraudulently after their emails were hacked and alternate instructions for hire payment were given to chartering brokers, who passed it on unwittingly.

Prior to paying, charterers checked with the brokers the post-fixture change of bank account details, but the fraudulent email address used was not noticed and as chartering brokers confirmed the amended bank account details, hire  was paid accordingly.  As is customary, chartering brokers did not pass on the full email received from their principals, but simply provided confirmation that the new bank account was correct (unknowingly, they had checked with the fraudsters themselves).

The fraud was not picked up until owners advised hire was not received, by which time the paid hire had already been transferred out of the fraudulent bank account, leaving charterers out of pocket and owners not having received hire.

We would strongly recommend that any change of bank account details post-fixture be checked via phone and email by the paying party directly with the receiving party.  Further, we would recommend that any action by and responsibility of chartering brokers to protect owners and/or charterers be carefully considered in post-fixture operations.

We would also point out that, as we have subsequently discovered, the fraudsters don’t just focus on charter hire, but also bunker payments, bunker brokers and any third party remittances – so this is not purely a charterer’s risk, but owners and the various brokers that can be involved as well.

In the event that a payment is made to a suspected fraudulent bank account, the paying party is advised to immediately contact their bank and put them on notice that payment instructions may be fraudulent and to ensure funds are not allowed to be transferred.  The Police will need to be involved immediately and, in Hong Kong, the Police will issue a ‘no consent letter’ to the bank which, whilst not binding on them, usually stops funds being moved.  The first step must be to put the bank on notice which, if done quickly enough, might allow funds to be recovered.

This is an increasingly common issue accordingly to lawyers, with substantial sums involved and prospects of recovery are limited so vigilance is required by owners, brokers and charterers.  Clearly, the security of emails, servers and communications need also be reviewed to avoid or mitigate the prospects of being a victim of criminals.

After the initial post above, we have subsequently received an E-Bulletin from the Charterers Club  which provides very useful information and advice on mitigating the risk and steps to take if it happens to you.

Insurance is available to protect against losses where fraudulent instructions or bank details have been given – contact us for more specific advice on any aspect of the above, or how insurances respond in the event of such an incident.

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