1.15 FRAUD AND CARGO THEFT
This handbook was written during a period of depressed tanker earnings,
when owners, managers and crews have been under severe economic pressures
for some time. In such an environment, the temptation to reduce fuel
costs or increase incomes by stealing cargo can be very strong. Even
in the best of times, there will be some crews and/or owners who believe
that a few tonnes of cargo missing here or there will not be detected
in the uncertainties of cargo measurement. Some of the cargo theft or
fraud schemes may be temporarily successful, but the vigilance of cargo
interests and the methods of detection are continuously improving, reducing
the chances for success to the level where even the most brazen miscreant
should be deterred.
1.15.1 Theft by owner
Owners may have in place a program for recovering slops and ROB cargo
for use as fuel, when suitable. (See sections 2.12.9,
5.35.2 and 5.42.5).
Such procedures are lawful so long as the cargo is safe for use and
the crew is not encouraged to artificially increase ROB quantities by
poor discharging technique.
In some cases, the amounts available as fuel from ROB do not meet the
owner's/manager's 'needs' and the owner may encourage the crew to increase
the amount of ROB cargo at completion of discharge. The encouragement
may be in the form of indications of continued employment, or as cash
payment for the 'sweepings' achieved during the ballast voyage.
In some cases, the owners or managers conspire with the crew to sell
cargo en route. The physical and safety risks of impromptu lightering
operations and the commercial risks of discovery and exposure make such
ventures suitable only for fools and idiots. Certainly, it is better
to wind up a business that is losing money than to put ships, crews,
the environment and professional reputations at risk in a vain effort
to stay financially afloat.
One method of attempting to confuse the calculation of cargo on board
and thereby concealing a subsequent theft, is to have a separate set
of ullage tables for the ship's tanks. The false tables reflect a smaller
quantity in the tank(s) than the vessel's true ullage tables. At the
discharge port the ship's correct ullage tables are presented for the
cargo calculation, with a result that no cargo appears to have been
removed from the tanks. Ullage tables should not be accepted by cargo
inspectors unless they have the imprint of an independent petroleum
inspection company or other accepted authority.
1.15.2 Theft by the crew
There are several cases on record of the master and officers of a tanker
selling cargo en route without the knowledge of the owner.
This kind of fraud has all the perils mentioned above plus the chance
of discovery by owners or managers. This type of theft is rarely found
in companies which have a program of careful crew selection, development
and retention. However, where the employment policy is to engage the
cheapest of available alternatives for officer or crew replacements,
with resulting high turnover of masters and officers, then the crew
can be expected to put their own interests well before those of the
owner. Because public disclosure of such theft can be nearly as damaging
to the owner's reputation as direct involvement, owners have another
reason to implement employment practices aimed at increasing crew retention,
development and loyalty.
Sale of cargo en route is usually discovered, although sometimes
not until the results of the voyage have been evaluated by the shipper.
The sums of money realised from a single cargo theft are rarely large
enough to keep an entire crew and their fellow conspirators silent.
When the master and officers keep the proceeds for themselves, it is
not unusual that someone in the crew will inform the owners or managers.
1.15.3 Detection and consequences
Cargo theft or fraud can be discovered or disclosed in a number of ways.
Independent surveyors and out-turn audit specialists are routinely engaged
to give the vessel's cargo measurements and outturn the closest scrutiny.
Discrepancies from previous performance will be noted and evaluated.
The cargo discharge report will call attention to any unusual result.
Computers have now given major cargo interests the ability to perform
detailed and sophisticated analysis of the results of their shipments.
The performance of individual vessels, of fleets of a particular owner
and even of individual masters and chief officers can be evaluated.
They can examine the outturn results of the same cargoes moving over
the same routes and determine by statistical analysis, the loss allowances
that should be expected. The Institute of petroleum guide voyage loss
allowances of 0.5% to 0.63%, are no longer accepted by the major cargo
interests. Cargo interests now know the loss a properly operated vessel
will experience for a voyage and are fully prepared to defend a claim
in arbitration or in court for any excess loss. Voyage cargo losses
are now expected to average closer to a range of 0.35% to 0.15%. The
amounts available between best outturn performance and acceptable loss
allowance are not large, being in the range of 2000 bbl on a 250,000
DWT tanker. The crew might realise $20,000 by selling this amount of
cargo clandestinely, hardly a sum which (when divided three or four
ways), should tempt a professional officer to risk his career.
It is not surprising that masters who have sold cargo en route have
not been the kind of leader who inspired loyalty from their crew, especially
if the proceeds of the diversion were not shared with the crew. In some
cases, masters guilty of cargo diversion have been discovered through
reports by the crew to owners or managers of the ship.
The consequences of cargo theft can range from loss of career to loss
of life (Section 2.12.9). When crude
oil is diverted for use as fuel, the low flash point can lead to catastrophic
engine room fires or explosions.'Underwriters will withdraw cover from
vessels which are discovered to have low-flash fuel in their tanks,
leaving owners totally exposed for any incidents which result. Port
authorities will evict such a ship from the berth or port until the
fuel is removed and tanks are cleaned and gas freed. Authorities will
initiate action to suspend or revoke the license of a chief engineer
whose vessel is found with low-flash fuel on board. Criminal conviction
for fraud or theft of cargo will prejudice the license of any officer.
All things considered, it is better for the vessel to be content with
recovering whatever fuel-suitable ROB comes to hand in the normal course
of its trade and to seek economies in other areas such as preventive
maintenance programs, engine efficiency analysers, weather routing and
detailed work planning.
In cases where vessels are discovered with false, or even uncertified,
ullage tables, authorities of some countries impose drastic penalties
against the vessel. In one case the chief officer was arrested for fraud
and a fine of USD 250,000 was imposed against the owner, because the
vessel was discovered to have on board a set of tables for another ship.