Definasi Frod

 Menyeleweng atau cuba menyeleweng

pembayaran duti/cukai.

 Menyeleweng atau cuba menyeleweng sebarang

bentuk larangan atau syarat-syarat.

 Menerima atau cuba menerima sebarang bentuk

bayaran balik, subsidi oleh orang yang tidak layak
menerimanya.

 Menerima atau cuba menerima kelebihan

komersial secara tak sah yang mana boleh
memberi “injury” kepada perniagaan sah.
 Types of Commercial Fraud
 Undervaluation
 Overvaluation
 Relief fraud
 Temporary admission fraud
 Transit Fraud
 Transshipment fraud
 Transfer price
 Wrong description
 Counterfeit/pirated goods (IPR)
 Money laundering
 Cyber-crime
 What Is Valuation Fraud?

Fraud Related To The Value Declared

To Customs For Goods Imported or
Exported
Types of Valuation Frauds
 PATTERN 1 : Inflation Of Insurance
& Freight Charges

Goods & CIF Invoice

 SELLER BUYER
Payment (CIF Invoice Price)

Insurance Carrier
Company

 Inflation of Insurance and Freight in F.O.B

basis Countries
 PATTERN 2 : Insurance Not Declared
& Inflate Freight Charges

Goods & CF Invoice

 SELLER BUYER
Payment (CF Invoice Price)

Carrier Insurance
Company

 Insurance Not Declared in C.I.F basis Countries

 Inflation of Freight Charges in F.O.B Countries
 PATTERN 3 : Insurance Not Declared
& Freight Not Declared

Goods & F.O.B Invoice

 SELLER BUYER
Payment (F.O.B Invoice Price)

Carrier Insurance
Company

 Failure to include insurance and Freight in

C.I.F basis Countries
 PATTERN 4 : False/Fictitious Invoice
Goods & False Invoice
for Customs Declaration
 SELLER BUYER
Payment On Genuine Invoice

 What are the Risk Indicators?

 Case Studies
 Risk Indicators on Invoices
 No VAT/GST Registration number
 Linguistic error (Color, Lobor Vs Colour, Labour)
 Errors on Letterhead-Ex Incorporated (US), Limited (British),
France (S.A), Germany (G.m.b.H), Italy (N.V), Switzerland (N.V
or A.G) etc
 Same type facing on all documents
 Date
 Address
 Telephone number
 Currency
 Arithmetic errors
 PATTERN 5 : Advance Payment
Excluded

Goods & Invoice (Balance)

 SELLER BUYER
Payment Only on the Invoice Price

Advanced Payment
 PATTERN 6 : Credits Deducted

Goods & Invoice (Credit Deducted)

 SELLER BUYER
Payment Only on the Invoice Price

Importer may have Credits with the Seller and Value

declared is only the amount shown on Invoice
 PATTERN 7 : Indirect Payments

Goods & Invoice (Ind. payment Deducted)

 SELLER BUYER
Payment Only on the Invoice Price

Seller’s Debts
Third Party

Payment of Seller’s Debt

 Importer may emit indirect payment

 PATTERN 8 : Discounts

Goods & Invoice (Discount Deducted)

 SELLER BUYER
Payment on the Invoice Price

 The Importer may claim an unjustified discount for

customs declaration but payment is made on the
actual value
 PATTERN 9 : Onward Sale Arrangements

Goods & Invoice

 SELLER BUYER
Payment Only on the Invoice Price

Next Buyer
Separate Payment
 Pattern 10 : Manipulation of Prices

Example

ABC 500 USD 50,000

XYZ 200 USD 5,000
Total USD 55,000

Rate of Duty-ABC nil/lower

Rate of Duty-XYZ 30%/Higher
 PATTERN 11 : Proceeds/Profit Sharing
Not Declared

Goods & Invoice (Basic Price)

 SELLER BUYER
Payment Only on the Invoice Price

Next
Buyer

Additional payment (Profit Sharing)

PATTERN 12 : Selling Commision/Brokerage
Excluded

Goods & Invoice

 SELLER BUYER
Payment Only on the Invoice Price

Selling Agent
Broker Payment
 Typical Services of A Broker

 Broker is an intermediary
 He acts for both buyer and seller
 He introduces the parties to each other
 Usually specializes in certain type of commodities,
i.e, oil, sugar , grains
 Brokerage will be included in the invoice price if paid
by seller
 Brokerage is not included in the invoice price if paid
by buyer
 Functions of Selling Agent

 Seek customers for seller’s goods

 Soliciting and transmitting orders from buyer to seller
 Maintaining samples and showing them to
perspective buyers
 Assisting in the arrangements for insurance,
transportation , storage and export documents
 Assisting in the preparation of export invoices
 Typical services of Buying Agent

 Finding suppliers for the goods wanted by the buyer

 Expressing the needs of the buyer to the seller
 Obtaining samples for buyer’s inspection
 Assisting buyer in negotiating the best prices
 Assisting in arranging for insurance, transport and
delivery
 Consolidating shipments from different sellers
 Preparing invoices for all goods purchased
 PATTERN 13 : Container & Packing
charges Excluded

Goods & Invoice

 SELLER BUYER
Payment Only on the Invoice Price

Packer
Payment of Container & Packing
 PATTERN 14 : Royalties & Licence Fees
excluded

Goods & Invoice

 SELLER BUYER
Payment (Invoice Price)

payment goods

Patent or
payment
trademark
Owner Wholesaler

The Importer may fail to declare the royalties paid or

payable
 What is Royalties & Licence Fees

 Is a payment to use a protected right

 It may relate to

 Intellectual Property (copyright)

 Industrial Property (patent )

 Commercial Property (trademark)

 Pattern 15 : Assists Excluded

Goods & Invoice

 SELLER BUYER
Payment Only on the Invoice Price

Third Party
Payment of Assists to third party
or incurred by the buyer himself
 PATTERN 16 :Overvaluation

 Transaction Value can be overstated for the

following reason:
1. Obtaining higher drawback than actually due.
2. Receiving a high amount of duty compensation
from the exportation of locally produced goods
which are entitled by law to such compensation.
 PATTERN 16 : Overvaluation

3. Evading anti-dumping duties

4. Evading internal taxes
5. Gaining a lower rate of duty from incorrect
classification
6. Evasion of exchange controls
7. Money laundering
 PATTERN 17 : Relief Fraud

 What is Relief?
 “Clearance of goods free from Customs Import or
export duties, provided they are imported or exported
under specified conditions.”
 PATTERN 17 : Relief Fraud

 Reasons to commit Relief Fraud:

1. Evade payment of duties and taxes
2. Evade prohibitions or restrictions
3. Pay a lower duty
4. Avoid quotes
 PATTERN 17 : Relief Fraud

 Four phases of inward Relief Processing

1. Pre-Entry
2. Import
3. Manufacturing/processing
4. Export
 PATTERN 17 : Relief Fraud

 Risk Indicators for Pre Entry Stage

1. Too generalized description of goods
2. High Duty Goods
3. First Time applicant
4. No listing in trade registry
 PATTERN 17 : Relief Fraud

 Risk Indicators for Import Stage

1. First time Importer
2. Unrealistic time taken for completion of Customs
formalities
3. Inconsistent point of Clearance
4. Generalized description of goods
5. Incomplete documentation
6. Quality/Quantity of imported goods inconsistent
with goods to be produced
 PATTERN 17 : Relief Fraud

 Risk Indicators for Manufacturing Stage

1. Excessive amount of wastage
2. Excessive delay between import and processing
3. Importing high quality materials to make low
quality goods
4. Disproportionate import of raw materials to
manufacturing capacity
 PATTERN 17 : Relief Fraud

 Risk Indicators For Export Stage

1. Quality and quantity does not match Imported
goods
2. Weight of container too light or too heavy
3. Nature of exported goods
4. Value of exported goods too low
5. Unlikely market destination
6. Abnormally long delay between the import and
export stages.
 PATTERN 17 : Relief Fraud

 Three phases of outward Relief processing

1. Pre-Exportation stage
2. Exportation stage
3. Reimportation stage
 PATTERN 17 : Relief Fraud

 Risk Indicators for Pre-exportation stage

1. Too generalized description
2. High duty goods
 PATTERN 17 : Relief Fraud

 Risk Indicators for Exportation Phase

1. Substitution of equipment with superior technology
for equipment with inferior technology
2. Substitution of original manufacturing number with
false identification number
 PATTERN 17 : Relief Fraud

 Risk Indicators for Re-Importation phase

1. Incorrect or false declaration concerning goods
experted originally
2. Incorrect declaration regarding the processes
completed on the goods during the processing phase
abread.
3. False shipping documentation
4. Incorrect declaration concerning the value of the
goods.
PATTERN 18 : Temporary Admission Fraud

 What is Temporary Admission Fraud?

 “Customs procedure under which certain goods can
be brought into a Customs territory conditionally
relieved from payment of duty and import
prohibitions”
 Such goods must be imported for a specific purpose
and re-exported within a certain time without having
undergone any change
PATTERN 18 : Temporary Admission Fraud

 Reasons for temporary Admission Fraud

1. Evade payment of duties and taxes
2. Substitute local goods with imported goods,
diverting the imported goods to the home market
3. Evade prohibitions/quotas
4. Evade origin restrictions
PATTERN 18 : Temporary Admission Fraud

 Risk Indicators for import Phase

1. First time importers
2. Inconsistent with importer’s business practices
3. Inconsistent use of points of clearance
4. Too generalized description of goods
5. Related parties
6. Inconsistent values for the goods
PATTERN 18 : Temporary Admission Fraud

 Risk Indicators for Temporary Stay

1. Goods not found at declared premises
2. Facilities are not consistent with goods Imported
PATTERN 18 : Temporary Admission Fraud

 Risk Indicators for Re-Export

1. Excessive wear and tear
2. Excessive delay in export
3. Quality and quantity does not match imported
material
4. Weight of the container too light/heavy
5. Time between imported/export
 PATTERN 19 : Transit Fraud

 What is Transit?
 “Movement of goods from one Customs office to
another in the same territory or to another destination
outside the territory”
 Transit allows the suspension of Customs and other
duties while under transport across the territory of a
defined Customs area.
 PATTERN 19 : Transit Fraud

 This type fraud normally involves high duty goods

 Must provide a guarantee to back up the financial
liability during the transit
 PATTERN 19 : Transit Fraud

 Weaknesses of Customs control

1. Paper based system makes it impossible to carry out
effective checks
2. Inability to check systematically
3. Forged or stolen Customs stamps
4. Corrupt officers
 PATTERN 19 : Transit Fraud

 How they do it?

1. Diversion for home use, substitute with Inferior
goods
2. Declare a low value on transit documentation, thus
avoiding larger financial liability.
3. Violator may post a forged guarantee
4. Violator may furnish false documents
 PATTERN 19 : Transit Fraud

 Risk Indicators
1. Seal and locks are tampered with
2. Undue delay made between the arrival of goods and
the request to grant transit facilities
3. Documents found to be substituted or tampered
with
4. Unusual breakdown or malfunctioning of
conveyance
 PATTERN 19 : Transit Fraud

5. Unscheduled change of routing without sufficient

cause
6. Inconsistency and incompleteness in the documents
furnished at the office of destination.
7. Inconsistency in weight, quantity, package,
container or receptacles.