How the forecasted economic downturn could breed a cataclysmic wave of fraudulent activity within the global supply chain. As British firms begin emerging from the confinements of Covid-19 after months of hibernation, business risk and compliance experts are urging businesses to be vigilant of leaving themselves open to fraudulent scams within their supply chains.


Since the beginning of lockdown, organised crime has mounted an effort to orchestrate a large-scale offensive to defraud already vulnerable businesses by praying on the widespread fear and uncertainty triggered by the pandemic.


The current volatility in the supply and demand of goods largely due to lockdowns, travel restrictions, warehousing capacity issues and labour shortages have all given rise to opportunistic fraudsters capitalising on the devastation caused by Covid-19 on global supply chains.


In response to this, opportunistic fraudsters have mobilised to exploit the unforeseen panic as boards and senior management staff scramble to ensure business continuity by diverting their attention to addressing priorities such as cash flow and liquidity within their enterprise.


Whilst necessary, such distractions have provided fraudsters with a platform to exploit any new or enhanced vulnerabilities in the supply chain – giving rise to dubious activities such as bribery, money laundering, and of course fraudulent scams, which have risen to record levels.


According to experts, it is not uncommon to witness a spike in fraudulent activity during times of hardship.


Criminology expert Professor Mark Button recently touted that there is a direct correlation between a struggling economy and heightened fraudulent activity – further suggesting that economic recessions often give rise to a small majority who will look to capitalise on the vulnerable.


His evidence demonstrated that the 1980 recession saw a 3 per cent fall in GDP which resulted in a 5.6 per cent increase in fraud-related offences, the 1990 recession saw a dip of 1.7 per cent in GDP followed by a 9.9 increase in scams and the 2008 crash caused an increase in fraudulent crimes by 7.3 per cent.


After its initial 20.4% drop in April, the Organisation for Economic Co-operation and Development has warned that the UK could be the hardest hit by Covid-19 among major European economies. The forecasted level of economic downturn currently being predicted could potentially lead to an unprecedented explosion in fraudulent activity throughout the globe – leaving supply chains susceptible to severe exploitation in the coming months.

As supply chains still remain severely disrupted as a direct consequence of Covid-19's prolonged impact, Chadd Blunt, Managing Director of West Midlands based Millennium Cargo, has stressed that importers and exporters will not be the only casualties in the event of fraudulent activity within the supply chain – as freight forwarders could also face severe consequences if found to be neglecting their duties.


Chadd told Prosper, "The levels of fraudulent activity within the supply chains indicate businesses are currently experiencing a pandemic within a pandemic – and freight forwarders are on the front line battling this outbreak.

"The responsibility of the global supply chain is entrusted to the capable hands of countless freight forwarders around the globe, and as an industry, we are responsible for ensuring that every consignment is exactly what it says on the tin – or face consequences issued by the Customs authorities.


"Due to the difficulty catching and prosecuting professional scam artists, HMRC have said that if forwarders fail to keep a full record of each transaction freight forwarders will not only face penal action under the full weight of the law but could also be subject to serious fines.


"Enacting the appropriate level of due diligence within your supply chain is therefore critical as fraud, bribery and corruption are currently at their peak – which subsequently leaves forwarders at greater risk of being tarnished with the same brush as international scammers.


"With fraudulent activity currently at critical levels, forwarders need to be vigilant now more than ever. Only last month some local authorities reported a 40 per cent jump in complaints regarding COVID scams, and it was also reported that more than 500,000 unusable face masks were among the hundreds of fraud crimes investigated by trading standards officers since the beginning of lockdown.

"Like it or not those who are responsible for forming each link of the supply chain are obliged to ensure that none of its components is directly or indirectly involved in dubious activities and that all goods moving through the chain are legitimate – and all within the industry have to make this an urgent priority if they are to avoid falling foul of fraud and the consequences that may follow."

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