CHAPTER ONE

INTRODUCTION

1.1  Background to the study

Today's international shipping involves people of many different nationalities with different laws, customs and institutions. Where world economies in the past were the result of empires, the present world economy grew out of relatively free exchange. Today's shipping community comprises shippers, charterers, shipowners, bankers, insurers, importers, and exporters and the system designed for the transfer of goods is simple and efficient, with the sea remaining the life blood of trade. In international trade, as a matter of custom, the seller gets paid before the buyer receives the goods, as because the delivery of goods takes considerable time. The system of letters of credit involved with banks as the intermediaries has proved fruitful and documents rather than goods form the focal point of these transactions (Becka,2010).

An international marine contract therefore requires the intervention of several parties. Fraud is a very insidious crime and arises when one of the parties to the marine contract; succeeds in obtaining money or goods belonging to another party connected in the carriage and financing unjustly. The threat of fraud is that it undermines the system by putting trust' at risks. The simplicity of the system of international trade makes it attractive and vulnerable to j forgersTj scuttlers and cheats. Maritime frauds takes place when any one of the various parties involved in an international trade transaction intentionally deceives another as to some fact or circumstance in' connection with maritime activities which enables him to obtain money or goods dishonestly. In some cases, several of the parties act in collusion to defraud another (Slonw,2015).

Fraud in commerce is as ancient as commerce itself, with examples going back to the Roman world and before. The International Maritime Bureau defined maritime fraud as: “An international trade transaction involves several parties – buyer, seller, shipowner, charterer, ship’s master or crew, insurer, banker broker or agent. Maritime fraud occurs when one of these parties succeeds, unjustly or illegally, in obtaining money or goods from another party to whom, on the face of it, he has undertaken specific trade, transport and financial obligations (Skuld,2014).”

Maritime fraud is becoming more common due to a number of reasons: Criminals are increasingly turning to new methods such as computer hacking, ports are adopting new technologies that in the worst case can enable new types of fraud (such as automatise container operations) and as shipowners are under pressure to win new business, many have disregarded due diligence when dealing with new business partners. As both the greater reliance on IT and electronic trading platforms and documents increases, so does the need to stay ahead of the game played by the Fraudsters. There is a “cost” of course, to greater security, both in terms of investing in better technology and processes, but also in potential business opportunities. In order to achieve the right commercial balance it requires experience, skill as well as knowledge of what scams and schemes are out there. Given that Shipping is a global business, with many players and jurisdictions involved in any single shipment of cargo, even a simple A >>> B voyage, there are a myriad of potential pitfalls where the unscrupulous seek to take advantage of the unprepared. As parties are often based in multiple jurisdictions, and necessarily deal with each other at “arm’s length” and / or through Brokers and Financial Institutions, there may be little or no opportunity to make “physical checks”(Skuld, 2014).

1.2  Statement of the Problem

Maritime fraud never has been so profitable and secure proposition than during the recent decades. In the late Seventies, maritime crime reached a new peak and the trend is going on in full swing. Now the question naturally arises as to how a maritime fraud occurs. We know that maritime transport plays an important role in international trade transaction where several parties such as sellers, buyers, shippers, shipowners, charterers, ship masters and crew, port authorities, inland howlers, bankers and insurers are involved. Maritime fraud occurs when one of these parties succeeds in intentionally and illegally obtaining money or goods from another of these parties. Maritime fraud is, therefore, that species of general fraud which is connected with the maritime field. It may take a variety of forms i.e. documentary fraud (by forging documents or signature) chartering frauds, intentional or non-existing loss of or damage to cargo, barratry, the scuttling of ships etc., etc (Kazi,2015).

Maritime fraud is truly international and the victim can come from any corner of the globe. The fraudster is indifferent to the colour, creed or political belief of his victim. There may be various form of maritime fraud and there is a great deal of evidence that a significant proportion of maritime frauds and related offences are perpetrated by organized groups. For years the shipping industry ran freely and well on spoken commitment, within a system. But there has been continuing infiltration by organized groups in the shipping industry and this is the single worrying factor to curb maritime crime and fraud. The deliberate destruction of the ship, whether by scuttling, fire or other means achieved a certain degree of prominence in the twenties. It then subsided until the Seventies, when it emerged as a totally new art. For example in the case of the Salem, not only was the cargo taken, but also the ship cast away. The days of the sinking of old and useless vessels by owners, if not past, have had to make way for methods employed by a much more intelligent, solvent, and organized group of fraudsters (Kazi,2015).

Maritime cargo frauds can range from the non-shipment of any cargo at all through to deliberate destruction of over insured cargo. Overvaluation as a means of fraud relates naturally to both vessel and cargo. For example, in the Medina Princess a vessel insured for a value at $350,000 was in fact worth only about$65,000 when insured (Kazi,2016).

1.3  Objectives of The Study

 The purpose of this study is to show the various fraudulent practices in the maritime industry or the seaport and the perpetrators of this act and to expose what the law has to do in such situations. Although a number of studies have been undertaken on the phenomenon of fraud in seaports, the increasing pace with which frauds are being committed called for continuous research on the subject to keep track of new devices employed by the fraudsters in defrauding the system, hence the rationale for this research work. To achieve this objective, the following secondary objectives have been specified.

 i) To identify the cause(s) of fraud in maritime industry,

 ii) To identify the various types of fraud perpetrators in martime industry,

 iii) To identify the various means employed in defrauding maritime activities,

 iv) To determine the effects of fraud on the business of international trade

 v) To recommend measures for reducing the incidence of martime fraud

1.4 Research Questions

How does a fraud practice in the bank affect the maritime sector?

 ii. What are the impacts of fraudulent acts of maritime industry, over the transaction of their customers?

 iii. What are the existence measures in maritime industry that can be used to check such fraudulent acts?

 iv. What measures can be used for prevention and control of such fraud practices in maritime sector (seaport)?

Significance of the study

The significance of this study is in the fact that it highlights the immediate and remote causes of fraud practices, effects, prevention, and control in Nigeria Shipping industry with particular reference to Nigeria Seaport. Several attempts have been made by researchers, writers e.t.c. On how to minimize or eradicate it if possible. In various organizations but such efforts have been focused mainly on manufacturing and distributive as well as public finance management, while little has been done on areas of Banking and other services industries. The studies have been geared towards finding out causes and consequences, prevention and control of frauds in Nigeria Banking Industry.

Therefore, the suggestions that are advanced in this study would no doubt be useful not only to the shipping industry but to all shipping firm be it public or private sector of the Nigerian economy. The content of this research and the suggestions to be proffered will serve as resources for further study in the same or similar areas maritime in the area of fraud practices (internally) prevention and control.

Scope of the Study

The study which aim at looking at the effect of maritime fraud on world seaborne industry will make special to the Nigeria port authority. The Nigeria port authority in charge of seaport and other marine elements in Nigeria and responsible for the regulations of shipping and other international trade in the country.

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