Guidance

Crime and fraud prevention for businesses in international trade

Crime and fraud issues in international trade: theft of goods, money laundering, cyber crime, employee fraud, infringement of intellectual property.

Introduction

Businesses in international trade face a growing threat from crime. Fraud is deceit for financial profit and has cost the UK economy more than £38 billion in the past year (source: National Fraud Authority - annual fraud indicators January 2011). Currently the main threat to international traders is fraud from organised crime, including theft of your goods or your business identity, cross-border crime and road-freight crime. Other risks include infringement of intellectual property or employee fraud.

The rise in online trading has created new forms of criminal activity, such as new ways of laundering money. Businesses in the EU can rely on shared laws and commercial procedures to protect them. This action-based guide explains the key risks involved, how to reduce them, and what to do if your business is targeted. 

Understand common types of fraud in international trade

Fraudsters may try to steal your goods, business identity or tap into your business to launder money. Criminals may approach you through letters, a phone call, or via email. Increasingly, cyber-crime is a principal priority risk for UK residents and businesses. Typical scams include investment offers or opportunities to acquire new customers who you supply but never receive payment from.

‘Phishing’, or rogue emails asking for your business banking details, are a common way to steal money.

You can anonymously report fraud by contacting Crimestoppers on Telephone: 0800 555 111.

Action Fraud is a central point of contact to call and get help if you have been a victim of fraud. Report a fraud online on the Action Fraud website.

You can contact Company Investigations if you suspect serious misconduct, fraud, scams or sharp practice in the way a company operates.

Money laundering and terrorist financing

Money laundering is the process by which funds derived from unlawful conduct are given apparent legitimacy - in essence cleaning the criminal proceeds. Terrorist financing is the process by which funds are gathered and used for terrorist activity. For more details, you should consult industry-specific guidance produced by your industry regulator or trade association. You can also find information on money laundering on the Financial Action Task Force website. Attempts to launder money and finance terrorism may not only be directed at international trade activities - domestic business activity may also be at risk.

The National Crime Agency (NCA), HM Revenue and Customs (HMRC), other law enforcement agencies, regulators and professional bodies work together to combat money laundering. Certain sectors, such as financial services, money service businesses, accountancy, legal, estate agencies, trust and company service providers, high value dealers and casinos have legal obligations deriving from the Money Laundering regulations 2007 and the Proceeds of Crime Act 2002 (POCA) (or the Terrorism Act 2000 in the case of terrorist financing).

Under POCA, all those working in regulated sectors who have reasonable grounds for suspicion must report their suspicion or knowledge of money laundering to the NCA. Failing to report either is a criminal offence.

POCA also applies to anyone not in the regulated sector who knows or suspects, or has reasonable grounds to know or suspect, that another person is engaged in money laundering; and that the information came to them in the course of his trade, profession, business or employment.

Read the Proceeds of Crime Act 2002 and the obligations you may have under the law.

VAT fraud

Missing Trader Intra-Community fraud, or carousel fraud, costs the UK several billion annually. VAT concessions on carbon allowances have also led to VAT fraud. While the frauds are carried out by organised gangs, businesses must take care to keep their VAT invoices, records and VAT numbers in order. It’s important to keep complete records on file, in order to avoid becoming liable for investigation by HMRC.

If you suspect you’re the victim of fraud, you should take steps to protect yourself.

Fraudsters may also attempt to steal your business identity.

Protect your business identity against fraud

It is estimated that every year in the UK identity fraud costs more than £2.7 billion and affects over 1.8million people. Organised criminals attempt to steal the identity of honest businesses so that they can commit credit card and online banking fraud. ID scams are getting more sophisticated and harder to detect.

Report business document identity fraud.

IT attacks

Many attacks may come through your business IT system. Thieves may try to access usernames, passwords and credit card details through ‘malware’ such as computer viruses, worms, Trojans, spyware or adware.

Taking action to prevent fraud

Use these simple ways to protect your business against ID fraud:

  • if your plastic cards are lost or stolen, cancel them immediately - keep a note of the emergency numbers you should call
  • be careful how you dispose of waste paper, particularly blank headed paper and financial correspondence
  • tear up or shred statements, invoices to suppliers and signed correspondence that you no longer need
  • never disclose or email financial details unless you’re absolutely confident you know who you’re speaking to or that the website you’re using is secure
  • sign up to the Companies House Protected Online Filing (PROOF) service, a free, secure online-filing scheme
  • under the Data Protection Act, you cannot discard intact customer, staff, and supplier information, so you should be sure to shred this too
  • don’t take a great-sounding business offer for granted - check the authenticity of the organisation through regulatory bodies
  • be vigilant

How to safeguard your IT against fraud

Computer security takes 3 forms:

  • physically protecting your hardware
  • electronic protection
  • educating yourself and your staff on social engineering attacks that can leave your systems vulnerable

Protect your computers physically

You should:

  • hold regular equipment audits and track movement of computers
  • keep computers in a locked room and secure your premises
  • keep records of serial numbers and identification marks
  • allocate responsibility for equipment to individuals
  • establish measures to control use and movement of equipment
  • mark your IT with postcodes or passive electronic-marking devices
  • use a burglar alarm
  • ensure that your staff take care of mobiles and laptop computers when using them away from business premises

Protect your computers online

You should ensure you have the right IT security installed and that staff understand security processes. You can take the following measures:

  • put an IT security policy in place
  • limit your employees’ access to information and restricting access to the level needed for each job
  • keep your passwords and PINs safe and change them regularly
  • use up-to-date anti-virus software
  • install a firewall
  • update all software with patches
  • don’t write down your password or other security information unless it’s well disguised
  • always take reasonable steps to keep your password and other security information secret at all times - never reveal it to family or friends
  • always access internet banking by typing the bank’s address into your web browser
  • never visit a website from an email link to enter personal details - if in doubt, contact the bank separately on an advertised number
  • check your bank’s website for safety tips
  • check your statement thoroughly
  • look for a locked padlock or unbroken key symbol in the bottom right of your browser window before accessing the bank site - the beginning of the bank’s internet address will change from ‘http’ to ‘https’ when a secure connection is made
  • don’t leave your computer unattended when logged in to internet banking
  • wipe your hard drive before you sell or give away an old computer
  • always have a disaster recovery plan in place and updated

Bank Safe Online sets out simple steps you can take to keep safe and provides updates on the latest scams. You can also report any suspicious emails or websites via the site.

Vetting business partners

Protect your business from crime and fraud, including money laundering, by checking your customers and suppliers. If a supplier or customer is reluctant to give you their details, it could be a bad sign.

How to vet a company

You can check the details of another UK company on the Companies House website. For a fee, you can sign up to the Companies House monitoring system, which emails you every time a document is filed.

To check a company abroad, ask for original documents of incorporation or for references from other companies.

You should check a new customer’s credit. Ask for references, or use an international credit-checking agency. You can also assess crime risks in the countries you trade with. You can find out about international credit checks and country reports.

You can check a new customer’s international bank account number (IBAN) to make sure that the code numbers are correct.

You can also check VAT numbers for companies within the EU.

Agree secure methods of payment

You should also agree secure methods of payment. These include:

  • payment on open accounts
  • documentary collection where the supplier draws up a bill of exchange, specifying when payment will be made - the customer becomes legally liable for payment once they accept the bill
  • documentary credit - customer arranges a letter of credit with their bank
  • electronic funds transfer using secure means

You can find out about secure cross-border payments.

Install best-practice safety procedures against business crime

Unfortunately, businesses sometimes face risk of crime and fraud from their own staff. Some specialist industries in international trade - such as the aviation industry - require staff to be vetted.

Positive vetting is increasingly common and is a valuable safeguard against attacks from within your business. You should:

  • check the identity and take up references of all new employees
  • know your staff well enough to be able to spot financial pressures or alcohol and drug problems
  • check staff frequently in purchasing and accounting departments - and supply-chain processes - where theft is most common

Because of the information restrictions arising from the Data Protection Act, the police can’t provide information concerning the criminal background of individuals. Ask your prospective employees to provide this information themselves.

Installing safety processes in your business is important to deter criminals. You should:

  • create a best-practice code of ethics for staff and an IT Security policy and treat employees fairly
  • use logical access controls - ie, limit your employees’ access to information and restricting access to the level needed for each job
  • introduce business continuity plans and risk assessments for your IT
    and treat employees fairly
  • regularly review internal financial and stock control systems
  • ensure your systems cannot be bypassed
  • conduct random audits
  • review your vulnerability to fraud and theft every 6 months
  • keep your IT secure
  • ensure that there is a clear separation of duties between staff involved in security, sensitive and financial work eg, to prevent one member of staff undertaking all the steps necessary to make a payment without supervision or authorisation

For organisations working in, or relying on, the logistics industry, certification to the international ISO/PAS 28000:2005 supply-chain management standard minimises the risk of security incidents during the delivery of goods and supplies.

It’s important to work with reputable shippers. For air cargo, it’s recommended that you work with registered air shippers or consignors. You can check if your aviation supplier is registered.

It’s also important to use reliable freight forwarders. You can check if your UK freight forwarder is registered with British International Freight Association.

When shipping internationally, make sure that your foreign freight forwarder is a member of the International Federation of Freight Forwarders (FIATA), the world-wide equivalent of BIFA. You can check the membership list online.

Some high-risk industries, such as banking, chemicals, excise trading, and freight transports, must comply with specific regulations and use approved premises. Contact your trade association for help. You can search for your trade association.

Safeguard against crime in your supply chain

Criminals target high-value disposable goods such as alcohol, cigarettes, electrical goods, computers and designer clothing which they can sell easily on the black market. Road freight crime in the UK is on the increase - it is estimated that it costs the UK economy up to £250 million a year (source: TruckPol, 2011). You can read about lorry crime prevention

Vet staff

It’s a good idea to vet your staff and pay particular attention to security staff - remember to include temporary workers. Check the identities of drivers who collect your goods.

Don’t forget to ensure transport and security staff are well trained. You can find out about training for maritime and security staff.

Bribery

The Bribery Act is now in force in the UK. While bribery in business is already illegal and traders may have been subject to anti-bribery obligations abroad, the act has added a duty for businesses to protect or safeguard against accusations of bribery. For example, a firm can be held liable for failing to prevent individuals bribing others. However, the new law makes clear that genuine hospitality or similar expenditure doesn’t count as a bribe.

Insurance and asset recovery

You should make sure your business is properly insured against crime and fraud.

Check your freight is properly insured. An agent or freight forwarder may be able to help you with this. See the guide to using brokers and freight forwarders.

The standard international trade contract terms (Incoterms) will help clarify who is responsible for your goods at each step of the trading process. See the guide to international commercial contracts - Incoterms.

Key security factors to consider

It’s important to keep opportunities for crime on the premises to a minimum when moving goods. For instance, keep washrooms and social areas away from the main cargo depot or goods storage. Also, when you package goods, try to use a seal for each container. Your seals should be numbered and issued one at a time.

Safeguard your premises. It’s a good idea to secure:

  • the entry and exit points of your premises with gates
  • perimeter fencing
  • cargo storage areas

Log in the entry and exit of:

  • empty containers
  • full containers
  • general goods

Key transport security factors

You should:

  • inspect trucks, lorries and containers regularly
  • inspect non-company vehicles and visitors’ vehicles
  • use registered freight carriers

You can read about road freight security.

If you discover crime in your supply chain, call the police.

Understanding intellectual property crime

Intellectual property (IP) is the collection of unique ideas, products or information that adds commercial value to your business. IP includes copyrights, patents, trade marks, industrial design rights, plant breeders’ rights and plant variety protections and logos. You can find out about different types of IP and their purposes.

Types of IP fraud

IP fraud is difficult to measure but steadily on the increase. It’s currently estimated at £9 billion in the UK alone (source: Intellectual Property Office, 2009). These illegal imports threaten the trade of legitimate UK businesses.

Current crimes include:

  • importing illegal goods, such as counterfeit, pirated, or patent-infringing goods
  • importing plants or seeds that infringe national or community plant variety rights
  • imports that infringe designations of origin or geographical indications, for example ‘Champagne’ that is simply fizzy wine

There are many different types of IP crime - you can read more about IP crime.

Unwittingly, some honest UK businesses commit IP fraud by buying goods from suppliers abroad who are infringing other businesses’ IP rights. Importers must check that suppliers are legitimate and that their imports aren’t infringing existing IP rights belonging to competitors.

What to do if you suspect your IP rights have been infringed

Under EU law, HMRC can protect your business’ IP against illegal imports. With your help, officers from the UK Border Agency can identify, seize or destroy counterfeit goods. You should examine a sample of the goods and the suspected counterfeits may be tested and verified by a testing agency.

If you think fraudulent goods are arriving in the UK, ask HMRC for help. You can apply for customs action at the UK border. Find a downloadable version of the National Form (Intellectual Property Rights Application).

Customs officers will also take action for you in 2 or more EU member states. 

The Intellectual Property Office has produced guidance on the steps you should take if you discover counterfeit or pirated goods in your supply chain.

Contact enforcement authorities in the USA.

How to report a business crime or fraud

If you’re under threat of fraud or if you become aware of a crime - whether against you or not - you should report it.

If a business owes you money unlawfully or you suspect one of its members of criminal activity, contact Company Investigations.

You can also contact Company Investigations at the Insolvency Service if you suspect serious misconduct, fraud, scams or sharp practice in the way a company operates.

As a first step, call the local police. You can find your nearest police force on the Police Information website.

Action Fraud is a central point of contact to call and get help if you have been a victim of fraud. Report a fraud online on the Action Fraud website.

The police can help with all types of international trade crime except fraudulent imports of intellectual property, in which case you should contact HMRC. The police deal with the theft of goods, extortion, fraud, and the smuggling of drugs, excise goods and people.

You should then call your insurers without delay. Insurers, particularly those dealing with international trade, will provide you with valuable assistance and in many countries will work with the police to process your claim.

If you suspect you’re the victim of organised crime, you should contact the police. If you’re feeling intimidated, bear in mind the police are improving the way they protect victims of crime.

Find out what happens when you’re called to court to give evidence as a witness.

It’s a good idea to contact your local trade association for crime-fighting advice.

If you’re the victim of freight crime, you can contact transport trade associations for help.

TruckWatch is a crime-prevention scheme run by the Road Haulage Association, the Freight Transport Association and the Police. If a member’s vehicles are stolen, the theft is reported to TruckWatch and the vehicle details are circulated to all ten thousand members.

Trade in some goods, including drugs, firearms, wildlife, weaponry and strategic goods, is restricted. Trading in some goods is illegal.

If you suspect banned or restricted goods are entering or leaving the UK illegally, call the police. They have powers to seize goods and prosecute criminal traders.

Money laundering: how to make a Suspicious Activity Report (SAR)

If you suspect money laundering, submitting a SAR to the NCA means that you will be complying with the PCA 2002 or the Terrorism Act 2000.

A SAR alerts law enforcement officers that some of your client/customer activity appears suspicious and might indicate money laundering, terrorist financing or proliferation. Submitting a SAR provides valuable information on potential crime as well protecting you, your firm and UK financial institutions from the risk of laundering the proceeds of crime, terrorist financing or proliferation.

Where persons or businesses have concerns about a proposed transaction or other business activity they plan to undertake in the future, the law provides a defence against potential money-laundering charges if they have first submitted a SAR asking the NCA’s UK Financial Intelligence Unit (UKFIU) for consent. Where consent is sought the NCA has 7 working days to respond. If consent is refused the transaction or activity must not proceed. Law enforcement action should take place within 31 calendar days of a decision to refuse. If it becomes clear at any time that this planned activity cannot be undertaken within the 31 days, the NCA will inform the reporter. Please note that the NCA’S consent to undertake the activity does not automatically mean the funds or the activity is not linked to criminality. Any future suspicion on the same client or activity should be considered on its own merits, and not set aside because the NCA granted consent to a previous submission.

Guidance and support

The preferred method for submitting SARs is via the NCA’s SAR Online system. The NCA also has a helpdesk to help you to submit SARs, available from 9am to 5pm Monday to Friday (excluding bank holidays). If you need help submitting a SAR, via SAR Online or by other means,  please call UKFIU - SAR Control on Telephone: 020 7238 8282 and select option ‘3’ from the menu.

Sources of help and support in managing international crime and fraud

As a trader, there are several sources of information and practical support to help you safeguard your business against crime. As a first step, it’s a good idea to contact your trade association or seek advice from your freight forwarder or customs agent.

Prevent crime

You should try to keep up to date with the latest scams and stings. You can view fraud updates. You can also see the latest news on card fraud.

The key source of crime prevention, support and prosecution in the UK is the Police. You can find your nearest police force on the Police Information website.

Sources of help

If you’re the victim of international trading crime, key government organisations may also be able to help you. The Serious Fraud Office (SFO) investigates international fraud.

Action Fraud is a new UK point of contact to call and get help if you have been a victim of fraud. Report a fraud online on the Action Fraud website.

You can contact Company Investigations if you suspect serious misconduct, fraud, scams or sharp practice in the way a company operates.

The NCA’s statutory remit, as provided in its founding legislation, the Serious and Organised Crime and Police Act 2005 (SOCAP), consists of preventing and detecting serious organised crime and contributing to the reduction of such crime in other ways and to the mitigation of its consequences. The NCA’s strategic priorities as set by the Home Secretary are Class A drugs, organised immigration crime, non-fiscal fraud, cyber crime and firearms. The NCA is also working to target and recover criminal finances and profits generated by unlawful conduct.

The UK Financial Intelligence Unit is part of the NCA’s Strategy and Prevention Group and has national responsibility for the financial intelligence submitted through the Suspicious Activity Reporting regime.

Overseas Security Information for Business (OSIB) provides security related information to British business.

In Scotland and Northern Ireland, the Scottish Crime and Drugs Enforcement Agency and the Police Service of Northern Ireland will continue to exercise the functions they currently undertake in partnership with existing UK agencies.

HMRC is responsible for preventing and detecting illegal import and export of controlled drugs, the investigation of organisations and individuals engaged in international drug smuggling, their prosecution and identification of the proceeds of such crime.

HMRC works with the police and other agencies at home and abroad. The Maritime Branch is responsible for marine operations to detect and stop traffic by sea and for developing international cooperation in this field. The HMRC Law Enforcement division is also responsible for the management of the HMRC Drugs Liaison Officer network and for operational intelligence resources.

While traders may not deal directly with EU organisations, key agencies are implementing plans to reduce trade and crime in international trade. Customs cooperate with each other, and the EU has a dedicated police service, Europol. Shared laws and trade processes make this easier within the countries of the EU.

Further information

NCA Helpline

Telephone: 0370 496 7622

Metropolitan Police 24-hour Switchboard

101

Companies House Contact Centre

Telephone: 0303 1234 500

Action Fraud Helpline

Telephone: 0300 123 2040

Crimestoppers

Telephone: 0800 555 111

UKFIU - SAR Control

Telephone: 020 7238 8282

Scam-spotting guidance

Security advice for small businesses

Identity fraud management advice

Business and computer equipment protection guidance

Road-freight crime information

Road security guidance

Read action tips on how to prevent bribery in your business

IP protection advice

Enforcement of IP rights information

Published 9 October 2012