Page 42 - BF Cover February 2019

ARTICLE

ARTICLE

Frauds in International Trade -

Understanding Modus Operandi

& Remedial Approach

Introduction: and unrated sector of Small and Medium Enterprises (SMEs),
this risk is going to grow with the passage of time. SMEs
Banks, trading houses and shipping companies are continuing
tend to offer substantially less public information, financial
to be targeted as victims of major fraud operations in
international trade transactions. Counterfeit trade, where history and third party analysis than their large corporate
fake sales and purchases take place for creating inflated counterparts.
turnovers, transfer money among entities, steal from banks
Fraud affects everyone in the banking, shipping and trade
or commit tax frauds, is worth around 600 billion dollar
annually. chain. Trade finance frauds result in huge money and
reputational losses. Fraudsters are coaxed by the amount
involved in these frauds and they find it easy to hide their
By misusing the new technologies, criminals are adopting
new ways and tricks for frauds. Although most of the trade identities. Technology also favors fraudsters. It is easy and
inexpensive to create a fake website, fake documents with
transactions were genuine, weaknesses or loopholes will be
convincing logos and even such specific documentation as
exploited by those trying to manipulate the system and
controls. Fraudsters seek to exploit any such situation and
design malicious strategies to surpass such systems and
controls .With the growing appetite of banks for earning
more profit and diversification of business to unorganized

About the author

Deepak Nagar
Chief Manager, (Faculty Foreign Ex-
change), Union Bank of India,
Staff College, Bengaluru

42 | 2019 | FEBRUARY | BANKING FINANCE