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[Music] [Music] hello and welcome to the ICC live cast a new podcast series where we take a deeper dive into global business trends and ideas I'm your host Thomas Paris and today I'm joined by Putin gal Mukunda director of the International Maritime Bureau at the International Chamber of Commerce's Department of commercial crime services so just a few notes before we get started we are pre recording this episodes there will not be a live chat component this time the reason is that we had this fantastic face-to-face opportunity during moku's visit to Singapore for the launch of our latest certificate but for everyone watching this video I recommend that you register for free and early access to our upcoming live streams in this episode we will discuss the key role that the imb is playing in mitigating maritime risk and commercial crime the impacts on global piracy and what role both the ICC Academy and imb will play in providing solutions for the industry in the form of the new NVOCC code of conduct register and certificate thank you so much for coming aboard muku could you tell us a little bit about the imb and the Department of commercial cramp services spec so the ICC commercial crime services is a specialized division of the International Chamber of Commerce the ICC and we we look into commercial crime for business in the commercial crime services we have four divisions the International Maritime Bureau the counterfeiting Intelligence Bureau the financial Investigation Bureau and our and what we call frog net so what concerns us for the NVOCC registered is the International Maritime Bureau the imb which looks into shipping trading and trade finance issues it was started in 1981 and it arose out of at that time a number of very serious maritime insurance claims where ships fully laden with cargoes were sunk and we at that time our role was to collect as much information as we could and feed it back to the insurance industry in respect of these cases Pearson's moved on from there and about four or five years after that in in mid-80s we began looking at verifying bills of lading for banks the reason is that banks have to take their decisions based on the documents that they see and they have no way of knowing if those documents actually represent a physical cargo which has been shipped if it does not then they would be financing a spurious transaction with all the implications of money laundering which flow from that so that was a trade finance site in 1991 we also set up our piracy Reporting Center in Kuala Lumpur which till today remains the only Center in the world which collects information on attacks against ships around the world covers the whole world there are other regional centers run mainly by governments who focus on the attacks in their area but we remain the only center first of all which is industry sponsored and secondly which collects information from all around the world and it has become a major resource for anyone looking at piracy attacks the frequency the areas the high risk issues related to maritime piracy very interesting in this extremely volatile context who reaches out to the International Maritime Bureau we get our information from the front line of the crime itself that is from the ship masters who ships are attacked or the ship owners either during the attack or shortly afterwards and once we receive that information it is verified very quickly and passed on immediately to law enforcement agencies navies Coast Guard police in different parts of the world we have direct contact so that they can respond and in serious cases we will follow up with them as to what they have done it has helped prevent serious consequences of these attacks in numerous cases it has helped prevent the hijacking of ships the kidnapping and in some case cases injury or killing of the crew so it's it's it's been a very valuable service so it's safe to say that the imb is responsible not just for saving lives but millions of dollars worth of cargo it's important to point out that maritime transport is essential to the world's economy even today over 90 percent of the world's goods are transported by the sea so security is important yes we provide we provide a valuable service yes piracy itself will will always go up it goes up then it gets dealt with it comes down and then it rises again that's been our experience and that that will continue what we have to be ready for is to learn the lessons of the piracy phenomena that we have had in the past Somalia is a very good example which was unique in some ways and learn those lessons and be ready to apply them when the next peak arises somewhere else in the world I think that's important the real pity would be if we don't learn those lessons and we are going to start again from the beginning remember that in trying to deal with maritime piracy you have a huge number of very diverse stakeholders you have got the coastal state you got the coastal States response agencies you got maritime shipping which is international in its nature different types of cargos ship owners insurers crew issues it's it's a very wide canvas but your reach goes well beyond piracy how and when are your teams called upon when it comes to maritime trade risk related to bills of lading fraud so this the NVOCC project comes under the under the area of trade finance frauds and which we have been looking at as I said from the mid 80s onwards what we have found in the last 10 or 50 sale of what we have found in the last 15 years is that the vast majority of the bills of lading which we identify as false are issued by non vessel owning common carriers NVOCC s and we we come to know about this because it is the banks who send us these bills of lading to verify often under time pressure because the banks have a very short window in which they can either reject the transaction or they pay under it so we we work with that time window and we will be verify these bills of lading and we pass this information to the banks so that then they can take their decision as to what what they have to do in some cases they may decide not to proceed in others they may decide that they will proceed but under different conditions and so on and so forth but this this process has resulted in a huge wealth of data which is now in our database or at the CCS and it identifies patterns it identifies trends it identifies commodities which are used in these kind of frauds and so then we have a new kind of fraud that is very quickly identified and and we have we use it to help us with the future and it's a unique resource and what are the different types of indicators that banks should look out for in this area fraud each Bank has its own criteria for identifying what they consider to be high-risk and it depends upon the mix of their customers the areas that they deal with the commodities that they work with the values that they are working with so they will have their own parameters so of the of the transactions which become high-risk in for that particular bank from that group of transactions they will decide to send us a selection for verification that's how the system works so and one because it is it is impossible to verify every transaction that the bank has got they have to do it on a risk-based approach exactly and this is where you do NVOCC code of conduct and register come into play these new tools both launched in January 2019 alongside our latest certificate on the same topic what can you tell us about this project this arose because from our analysis over 95% of the false bills of lading which we have identified have been issued by Noor NVOCC so when we approached when when the banks were told about this they asked us to look at a way to mitigate this vulnerability and the NVOCC register is the result of our work in this area so our basic principle here was to ensure that this was a business solution to a business problem we we didn't want it to become a matter for regulators to step in and we also wanted it to be economically beneficial for the NVOCC s to participate in in in our program and this has led to the NVOCC register the NVOCC register is something that we invite all envied OCC's to sign up to when they sign up to it they also sign up to a code of conduct for the issuance of bills of lading it does not deal with any other aspect of the NVOCC operation and what we are looking for here is that the NVOCC s will have available all the backup documentation which includes their authority to issue bills of lading and the master bill of lading issued by the carrier with them should that bill of lading be questioned when the bill of lading is sent to us and we buy the bank and be verified and it turns out that the bill of lading appears to be false then we will go back to the NVOCC and we can ask them to produce this backup documentation if they are not able to produce the documentation or give a satisfactory explanation as to how that bill of lading came to be issued then that counts as a as a mark against them and they are allowed to have no more than two such marks within one membership here after the second and all these in the case of every infringement there is course there will be correspondence between us and them which confirm what has happened after the second infringement we would ask we would ask them to either go through a training program for their key personnel so that they understand the very important role that bills of lading play in their trading chain and how other stakeholders like bangs shipping companies and others rely upon that Bill of Lading for the smooth movement of goods and and financing of goods and they will also have to show that they have made some changes within the way they operate to ensure that bills of lading are not issued recklessly once they provide this provide these two aspects provide these two pieces of information then they will be allowed to remain on the register but they will not be allowed another infringement which if there is a further infringement they risk being removed from the register now why is this important because we are we are hoping that the banks will tell their customers to ask the NVOCC s who provide their shipping documents to sign up to the register because it gives the bank's a degree of assurance that their document this document has been produced under a minim minimal good practice so there is a very subtle pressure upon the NVOCC which will to sign up to the register and comply with the code of conduct it therefore becomes in his economic interest to do so and that is always the best way to improve standards rather than by enforcement so this project extends past these NVOCC x' to the banks themselves but of course they're not the only players on the transaction chain what would you say is the value for the exporters well the the benefit for the exporters is that when these present present their documents to a bank for payment under under trade finance arrangements a bill of lading which is issued by an NVOCC who's registered on the NVOCC resistor those documents may go may be processed a little faster and and that is their benefit and of course time is very important to these to these traders are there some risk elements that you expect will either adapt or percolate through this safeguard you're implementing for the industry this this project is aimed purely at the issue of bills of lading yes and the risks associated with issue of bills of lading so we think that it will help to reduce that risk quite significantly but you know with fraud you will always find that people will try to game the system over time and the the importance the important issue for us is to make sure that the register that and the terms of the code of conduct are such that it evolves to deal with the new new risks that we see but if if we can if we can succeed in taking away the large proportion of the risk in the issuance of bills of lading that is a very big step forward that makes sense and how do you see future leaps in technology playing a role in the coming years the technology with respect to the issuance of bills of lading is changing and people are looking at blockchain for example and other such platforms to to provide digital bills of lading that may change the way in which the register and the code of conduct works what is important is for the register and the code of conduct to keep up with it and to so long as there are bills of lading being issued then the register and the code of conduct must be a way to make sure that the not manipulated fraud will always be there you'll never be able to eliminate fraud people always find a way around it that's been the case since the beginning of maritime Commerce the International Chamber of Commerce has been looking ahead at key areas that might impact global trade I say that these kind of business solutions fit nicely into that vision given that ICC you know represents the interests of business anything that affects business is an area for ICC to to see if they can contribute to it and I think that with with issues of digitization cybercrime in our area and others there there will be new risks emerging and with those risks I think ICC as as the world business organization is uniquely placed to try and address them and make the necessary representations to governments in the international organizations to change the law and change best practices conventions and so on and so forth speaking of best practices last summer we came together with the aim of complementing your project by creating a companion training program to better understand the critical role of the Bill of Lading and the importance of proper issuance for those unaware the ICC can be Bill of Lading certificate has now launched day and date with your bureaus NVOCC registry and code of conduct with these resources now available I'm curious about your perspective especially behind the importance placed on education at this area well the ICC Academy in the NVOCC project is a place of very very key role you know in in providing this training program and I think that this training program may not be only limited to two delegates who are whose companies have fallen short of the code of conduct I mean the NVOCC Bill of Lading project and and the online course I think it's valuable to to anyone in banks into who banks shipping companies who are handling bills of lading so that they see the bigger picture you know of where the Bill of Lading sits in the trade transaction one of the big problems we find is where people don't have that bigger picture and therefore they look at the the Bill of Lading in a very through very narrow perspectives and that is where the problems arise because they don't see the interests of other people who rely upon it that's very important and I don't think this course is limited only to the NVOCC project it is it is a it's what broaden looking ahead at 2019 what would you say your bureau's biggest hurdles well we are we are very heavily focused and we have been last year as well and going forward we are heavily focused to meet the the changing nature of international trade in terms of digitization so we are upgrading all our systems they are evolving all the time so that we can remain relevant in in in the verification of trade transactions in ten years twenty years from now and we will keep improving we have will we don't believe that it is possible for us to simply rely on what we have done last year we need to look at what's coming two years from now three years five years from now and work work report in that respect and we are appear there already focused on that no this is an exciting time everything's finally out there now well the the the NVOCC register is now open for business and the code of conduct is all written up the our IT systems are ready to deal with the with people signing up for the for the register so we are all set and the the online course is ready so the project is now all complete all we have now got to do is to make sure that it remains relevant so we look at changes which are taking place in the industry and then upgrading the course for it and upgrading our code of conduct and register object you know and that that will be an ongoing process an we look at it every six months or so on this topic of learning and adapting what are some unexpected challenges that you've run into there are a number of fraud types which are taking place today and they're they're all different but perhaps one of the more interesting ones is where we have some traders who are actually trading the physical cargo they present a set of bills of lading to the bank for the physical cargo which is paid for and then they there is a second set of documents sometimes simply copy documents which are going through a different banking channel simply to raise money because the goods have been delivered and paid for under the first channel and here they use this second set of documents simply to raise money it is a challenge because the documents sometimes are are excellent replicas of the original documents genuine documents because of course the traders have intimate knowledge of these documents so superficial checks will not confirm that this is a second set of documents a multiple document and that is a real challenge but we have been able to verify many of these shipments and we once we tell the banks and the banks are on notice and then they have to deal with the relationship issues with their customers customers which arise and some of these frauds you know are frauds which are not transactional they are relationship frauds so they can carry on for years because once because neither the buyer nor the seller is de product they are both parties to the fraud and therefore they no one complaints and the bank is not aware that this there's funding or spurious transaction unless they make meaningful checks and those are first of all they're very interesting to do because it's a different it's quite a sophisticated kind of fraud but it also has great value for the bank when it is identified and there have been a number of these cases has there been a shift in the types of commodities or practices prioritized by these fraudsters I assume that these are all primarily raw materials being traded well from a from a fraudsters perspective the commodity itself is simply a description it is just a means to an end he can it can be any commodity at all but what attracts him more than others is commodities which are high value because for the same effort it is a higher amount of money that is that he gets out of it so it would be things like nickel nickel briquettes copper cathodes and very large quantities of we have had or all kinds of other commodities very large quantities of coal of steel of iron ore and there are there are other factors you know in trade which which are difficult like for example where you have containers nobody knows what's inside the container except the person who has stuffed the container and the person who discharges it disturbs it at the other end no one else knows what's inside it so the container becomes a very nice vehicle for for a shell for all kinds of fraud as we wind down from the excitement of today's press conference I wanted to slow down I take a moment to congratulate you on a successful launch of this project as I think back over the last few months I think I speak for all of us in qualifying this experience is both challenging but inherently rewarding it's very important that your expertise in maritime trade be accessible to winter generation thank you Tom aside I think it's been a great project in actual fact we started really working on this only about maybe six months ago you know on the real real project and we have brought the course to completion we've got everything else lined up thanks thanks to you for doing it thank you thank you thank you so much for your time look who it's been wonderful speaking with you and for those looking to sign up for the NVOCC register we recommend that you visit the International Maritime bureaus website there you'll also find the NVOCC code of conduct free of charge and don't forget that the ICC Academy has just released a new course on the topic of bills of lading you'll find a free demo on our website if you're watching now please subscribe to our youtube channel so we can continue having these lovely chests together and ladies and gentlemen this has been another episode of the ICC livecast see you next time [Music] you [Music]