Electronic Bills of Lading: Managing the New Risks That Accompany This New Technology
Fraud in the maritime and marine industries has traditionally been a prevailing risk, particularly documentary fraud involving the bill of lading (BOL).
To combat the threat of documentary fraud, the introduction of the electronic bill of lading (eBOL) – used to evidence receipt, the contract of carriage, and title – has been viewed as a means of minimising traditional, paper-based frauds.
Yet, despite these efforts, there is much disquiet surrounding the use of eBOLs. As with any comparatively new concept, there is uncertainty regarding possible risk exposures.
Advantages and Disadvantages of Using eBOLs
eBOLs offer several advantages that reduce the risk of fraud, including:
- Digital signatures.
- Audit trails.
- Insurance protection in the event of a security breach.
However, despite the advantages this technology offers, it does carry the following disadvantages:
- eRisks, cybercrime, and vulnerability of processes and technology.
- Vulnerability of people.
- Challenges of international law industry endorsement.
Recommendations When Using eBOLs
In order to avoid pitfalls that could come with the use of eBOLs, shippers/carriers, banks, and insurers should engage in the following:
- Training: Shippers/carriers and banking staff should be more extensively trained in international trade. Victims of trade fraud often lack information governing the commodity, route, method of trade, and ability to identify inconsistencies and irregularities in the documentation used and parties involved.
- Cyber awareness and risk transfer: Practitioners must be cyber-aware when it comes to their businesses and should take the following steps:
• Confirm where all address commissions and brokerage commissions are destined.
• Check the registered details of the parties involved.
• Confirm the banking details direct with receiving bank and the parties involved.
• Background research on the parties involved and their past dealings – with reference to the Baltic Exchange or BIMCO databases.
- Due diligence: Shippers/carriers, banks, and insurers should ensure that constant vigilance is maintained and discourage passive acceptance when handling eBOLs. Fraudsters need only the inattentiveness of staff-members to masquerade falsified/forged documentation as the genuine article.
To conclude, eBOLs offer a range of security benefits when compared with their paper equivalents. However, a note of caution is advised. By following the recommendations above, maritime and marine insurance practitioners should be better placed to identify and mitigate eBOL exposures.