INTRODUCTION

Fraud can be defined as an intentional act to gain an advantage by an unfair or unlawful gain. It means purposefully deceiving the truth to gain an advantage over others. In fraud, there are teams of unscrupulous people who manipulate, or influence the activities of a target business with the intention of creating money or getting goods through illicit or unfair means.

The threat to International trades can be seen in the way of organized crime, including theft of your goods or your business identity, cross-border crime, and road-freight crime. Other threats can include infringement of intellectual property or employee fraud. With the rise in online trading, fraud has taken a new form of criminal activity.

International trade fraud has certain key elements – There is an element of deceit or of providing inaccurate, incomplete, or misleading information; or the reliance on the deceit or if there’s a significant economic dimension and scale to the fraud; or if the fraud uses or misuses and compromises or distorts industrial systems and their legitimate instruments, probably making a global impact.

International trade fraud is an event of international commercial transactions. It affects traders through the loss of freight, enhanced insurance premiums, and shipping expenses, likewise as the price to final consumers. the kinds of fraud vary from documentary fraud; charter-party fraud; deceitful insurance claims; scuttling; diversion of cargo; counterfeiting, and money laundering.

Commercial frauds misuse technical terms by using an actual term in an incorrect context to impress or intimidate victims or their advisors or inventing a powerful sounding term to realize credibleness, to obscure implausible aspects of the scheme. Commercial frauds in case of legitimate transactions involve the use of multiple documents. However, these documents employed in commercial frauds often differ from those employed in legitimate transactions either as a result they are improperly written or as a result they contain some unusual options to induce investment, to bolster the fraudster’s credibility, to elucidate the extraordinary returns claimed by the fraudster. It is usually possible to work out the prospector presence of a commercial fraud by distinguishing these irregular aspects. These documents usually are fraudulent, forged, or fictitious, which are either properly or improperly by each institution and the individuals.

REPORT OF VARIOUS ORGANIZATIONS

Organizations of all sorts and sizes are subject to fraud. On a variety of occasions over the past few decades, major public corporations have experienced financial reporting fraud, leading to turmoil within the capital markets, a loss of investor worth, and in some cases, the bankruptcy of the company itself. After all which Sarbanes-Oxley Act has made several amendments to improve the company governance and reduced the incidence of fraud. And further recent studies and surveys indicate that investors and management still have issues relating to finance-related frauds.

The ACFE’s 2010 report back to the Nations on Occupational Fraud and Abuse found that financial statement fraud, whereas representing less than five % of the cases of fraud in its report, was far and away from the most expensive, with a median loss of $1.7 million per incident. Survey participants calculable that the standard organization loses five-hitter of its revenues to fraud annually. Applied to the 2011 Gross World Product, this figure interprets to a possible projected annual fraud loss of over $3.5 trillion. The median loss caused by the activity fraud cases in our study was $140,000. Over one-fifth of those cases caused losses of at least $1 million. The frauds reported to the United States lasted a median of eighteen months before being detected.

According to “Annual Fraud Indicator 2012” conducted by the National Fraud Authority (UK), the size of fraud losses in 2012, against all victims within the United Kingdom, is within the region of $73 billion each year. In 2006, 2010, and 2011, it was $13, $30 and $38 billion, severally. The 2012 estimate is considerably larger than the previous figures as a result of it includes new and improved estimates in a very range of areas, particularly against the private sector. Fraud harms all areas of the UK economy.

TYPES OF INTERNATIONAL TRADE FRAUD

• Corruption and felony – Corruption has been outlined by Transparency International as “the abuse of entrusted power for personal gain”. Further differentiation has been created between “according to the rule corruption” and “against the rule corruption”, whereby the former includes facilitation payments, where a bribe is paid to receive advantageous treatment for one thing that the receiver of the bribe is needed to do by law, whereas the latter includes bribes to get services that the receiver of the bribe is prohibited from providing.

A number of international organizations have adopted instruments, as well as conventions, aimed toward fighting corruption and felony. These organizations include The United Nations; the Organization for Economic Co-operation and Development and others.

• Money-laundering – Money-laundering is also represented as the practice of engaging in specific financial transactions in order to conceal the identity, course, and/or the destination of money. a number of national and international rules and programs are developed to combat money-laundering. , there’s a good deal of data accessible on money-laundering, each across the nation and internationally.

• Transparency – Transparency has been outlined, again by Transparency International, as a principle that permits those affected by administrative selections, business transactions or charitable work to understand not solely the fundamental facts and figures, but also the mechanisms and processes by means that of which the selections were made and transactions entered into. because it is that the duty of each civil servants, managers, and trustees to act visibly, transparently, predictably, and understandably. As a general principle, true transparency should be brought in all transactions and if achieved, it’ll bring an end to the hindrance and claims of business fraud.

CASES RELATED TO FRAUD

The commercial and economic business of international trade was facing a growing threat from crime. Fraud is deceitful for financial profit and has cost the UK economy over £38 billion within the past year. Currently, the most threat to international traders is fraud from organized crime, including theft of your goods or your business identity, cross-border crime, and road-freight crime. Other risks include infringement of property or employee fraud.

The rise in online trading has created new sorts of criminal activity, like new ways of laundering money. Businesses within the UK and EU can believe shared laws and commercial procedures to guard them.

• ENCRON SCANDAL (2001)

Enron Corporation was an energy-based company in Texas, one of America’s seventh-biggest companies. The company enjoyed great success until the 2000s due to its innovative work culture and gained multibillion-dollar revenue over time. In October 2001, Enron started inflated the earnings and was removing the financial losses from the financial reports. The audit committee followed all the regulations and made the disclosures about the cracks and loopholes within the US corporate governance model in the early 2000s. Moreover, Enron tried to bribe the directors by paying them to align their interests with the shareholders. The crises at Enron can be seen as the manifestation of the failure of the agency theory and stakeholder theory of the corporate governance models. The collapse of Enron, which held over $60 billion in assets, involved one of the most important bankruptcy filings within the history of the U. S., and it generated much debate also as legislation designed to reinforce accounting standards and practices, with long-lasting repercussions within the financial world.

The scandal resulted during a wave of new regulations and legislation designed to extend the accuracy of financial reporting for publicly traded companies. The most important of those measures, took place by the Sarbanes-Oxley Act (2002), which imposed harsh penalties for destroying, altering, or fabricating financial records.

• SALEM CASE

Salem case is a very notable case of international trade fraud. Salem was an oil tanker that was scuttled off the coast of Guinea on 17 Jan 1980, after in secret unloading 192,000 tons of oil in Durban, South Africa. The oil was delivered in breach of the South African oil embargo, and therefore the ship was scuttled to fraudulently claim insurance. On 30 Nov 1979 Salem left the port of Piraeus to load oil within the Kuwaiti port of Mina Al Ahmadi, on behalf of an Italian charterer.

This case concerned the scuttling of a ship carrying over 200,000 tons of crude oil. millions of pounds were lost by the cargo owners, being the best price conspicuously lost in history. though the US $56 million was claimed from rights assigned under the insured cargo, very little has been recovered from the fraud. The case alerted governments and multinational companies of the inherent risks concerned in international operations. This also shows and highlights the points regarding the complications faced in international jurisdiction which makes it difficult to successfully prosecute the fraudsters.

• WORLDCOM ACCOUNTING SCANDAL

This scandal came as the surprising and most widespread known fraud of that period that shook to rock Wall Street of the generation. The WorldCom scandal was one of the foremost surprising and widespread frauds. In 2001, WorldCom, one of the world’s largest telecommunication firms that were being managed by several retirees who command in their portfolios. They further tried to falsely inflate the earnings on its profit and loss statement by nearly $4 billion. It did so by manipulating its financial know ledge, which affected its varied reports. WorldCom has discovered an extra $3.3 billion in accounting errors, doubling the size of the accounting scandal at America’s second-largest long-distance telephone company to over $7 billion.

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