Managing Fraud Risks in the Shipping and Ports Industry

Fraud has continued making headlines into the 21st century, yet many executives still believe that "fraud can't happen in my company". But fraud does happen, and often - nearly half (45%) of organisations in the Transportation & Logistics industry report having experienced fraud over the part two years, and the actual incidence of fraud may be even higher, as detection can be difficult. Fraud schemes in Shipping & Ports are manifold. Straightforward examples such as manipulation of financial statements, commerical bribery and cash skimming may occur as in any other industry sector and need to be addressed at the top management level. More specifically, the shipping and ports industry is susceptible to:

• Cargo theft and misappropriation of assets - the most prevalent type of fraud in this industry.
• Revenue leakage - likely to happen if shipping, billing and revenue recognition functions are not linked for all operations. 
• Unsupported payments - as shipping companies in a large number of countries with various business cultures, there is an inherent risk of these kinds of payments, which may be in contradiction to laws and regulations.
• Falsifications of shipping and customs papers - leading to shipping companies finding themselves liable for VAT, import duties, excise, even penalties on shipment.
• Carousel fraud, also referred to as the "VAT - merrugo - round" - taking advantage the opportunities for the falsification which arises when goods are shiped across borders.

How PwC can help you

Executives can reduce the risk of serious fraud by fostering a culture of honesty and high ethics, implementing a code of conduct supported by a whistle blowing system, evaluating and improving anti-fraud processes and control activities - as diverse as approvals, authorisations, verifications, reconciliations, segregation of duties, reviews of operating performance and security of assets - and developing an appropriate oversight process. Management should evaluate whether appropriate internal controls have been implemented in any area identified as posing higher risk, as well as controls over the financial reporting process. Controls is the core competence of PwC. Combined with our profound understanding of the industry, we can support Boards of Directors and management in designing and implementing appropriate risk management and control systems. In addition, our risk management and forensic experts, can help you minimise the risk of fraud and deal with it effectively once a case of misconduct is presumed or has occurred.