The WCO has published its first Trendspotter Study, with the aim of identifying trends in commercial fraud involving trade in goods. The Study was written by a project team with the assistance of experts from Customs administrations, and was funded by Korea Customs.
The Trendspotter methodology was developed by the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) for the rapid assessment of emerging drug-related trends. It aims, in particular, to make it possible to study phenomena for which we do not have a precise set of data and “involves the collection of data from multiple sources and the use of a number of different investigative approaches”.[1]
The use of this method to identify trends and modi operandi in the field of Customs-related commercial fraud has become necessary in the WCO, given the need to supplement the information reported by Customs administrations via the Customs Enforcement Network (CEN) database.
Besides CEN data, the project team and the expert group have consulted various sources of information:
- open-source documentation, such as reports by international organizations or published court cases of national and regional tribunals;
- scientific journals;
- answers provided by members of the expert group to a questionnaire;
- other existing internal sources, such as answers given by Customs administrations on a voluntary basis in the survey conducted in 2021 as part of the preparation of the Illicit Trade Report, or analysis by Regional Intelligence Liaison Offices (RILOs) and administrations.
Certain areas – essentially because they are addressed at the WCO in the context of specific programmes and working bodies – were excluded from the scope of the Study: excise goods such as tobacco and alcohol products; illicit trade; transfer pricing; and money laundering. However, the Study refers to these areas when necessary to give a more holistic picture of the current situation.
The Study analyses the three most significant types of fraud: undervaluation, misdescription, and smuggling. It also highlights several activities that have been identified as the main threats when it comes to commercial fraud: illicit activities relating to e-commerce, the use of shell and vanishing companies, the circumvention of anti-dumping and countervailing duties, exploitation of free zones, mechanisms to fraudulently evade VAT obligations, fraud committed by passengers, and modi operandi in maritime transport.
In its conclusions, the Study describes how the profile of fraudsters has evolved, and the effects of successful operations by fraudsters. It also looks at detection methods, tools and operational measures that have proven successful in certain countries.
The last section of the Study presents several recommendations that would enable the WCO to better understand fraud trends in the future. It proposes, among other things, the creation of a Commercial Fraud Observatory. The Study also underlines the need for Customs administrations to report cases of commercial fraud in the CEN database, and to provide enough detail on each case. In fact, although 4,030 seizures were reported in the CEN in 2021 under the category “tax and duty evasion”, the nature and type of fraud were indicated in only 584 of them, and the modus operandi was almost never documented.
It should be recalled that WCO Members approved the “WCO Charter on Improving the Quantity and Quality of CEN Data” in June 2021 and, in doing so, committed to improving data entry in CEN.[2]
Customs representatives with a login and access to the Enforcement Section will be able to download the Study by visiting the WCO website via the link below.
More information
https://www.wcoomd.org/topics/enforcement-and-compliance/activities-and-programmes/revenue-programme.aspx
[1] European Monitoring Centre for Drugs and Drug Addiction, Trendspotter manual, 2018. https://www.emcdda.europa.eu/system/files/publications/10233/2018-trendspotter-manual.pdf
[2] See article in WCO News 99, Issue 3: https://mag.wcoomd.org/magazine/wco-news-99-issue-3-2022/enhancing-data-collection
Definition of Customs commercial fraud
Any offence against statutory or regulatory provisions which Customs are responsible for enforcing, committed in order to:
– evade, or attempt to evade, payment of duties/levies/taxes on movements of commercial goods;
– evade, or attempt to evade, any prohibition or restrictions applicable to commercial goods;
– receive, or attempt to receive, any repayments, subsidies or other disbursements to which there is no proper entitlement;
– obtain, or attempt to obtain, illicit commercial advantage injurious to the principle and practice of legitimate business competition;
– exploit, or attempt to exploit commerce for the purpose of transferring proceeds of crime.
