CUSTOMS brokers’ licenses might be at risk where the ABF considers that the broker has intentionally or recklessly facilitated fraud or failed to undertake proper due diligence. These situations can also lead to penalties being imposed on the customs broker as an individual, as well as actions against the brokerage and/ or forwarding business as a company. The challenge for us as customs brokers is that these days, we rarely have the opportunity to inspect goods and therefore our declarations to ABF are based only on the documents and information provided by the customer. At the same time, under the Customs Act s.4, we may be held liable for any underpaid duty or other error as if we are the owner of the goods.
Due diligence and good risk mitigation processes such as strong internal processes and systems must therefore be in place. Secure technology systems and standard operating procedures, especially for system and warehouse access rights and controls, are also imperative.
In addition, good and well drafted standard trading terms and conditions should be properly incorporated into all dealings with clients and those T&Cs should be regularly reviewed and updated as required.
Don’t forget also the importance of adequate insurance that covers both the brokerage and its nominees.
The potential consequences for customs brokers who intentionally or recklessly facilitate fraud or fail to undertake proper due diligence can be severe and can lead to penalties for the individual broker and actions against the brokerage or forwarding business as a whole. The challenge for customs brokers is that they often do not have the opportunity to inspect goods directly, so their declarations to the Australian Border Force (ABF) are based solely on the documents and information provided by the customer. Under the Customs Act s.4, brokers may be held liable for any underpaid duty or other errors as if they were the owner of the goods.
To mitigate these risks, the importance of implementing robust due diligence and risk mitigation processes cannot be over emphasised. This includes reviewing internal processes and systems, ensuring secure technology protocols, and maintaining well-drafted standard trading terms and conditions. These terms should be incorporated into all dealings with clients and regularly reviewed and updated as needed. Additionally, brokers should have adequate insurance coverage for both the brokerage and its nominees.
Key practices that customs brokers should follow include:
- Client Verification: Brokers should perform background checks on clients to verify their identity, including simple internet searches and phone calls to directory-listed numbers. It is recommended to deal directly with clients rather than through intermediaries like freight forwarders. Brokers should scrutinize all documents for inconsistencies and potential alterations.
- Regular Reviews: Brokers should regularly review and update their internal processes and systems to ensure they are effective in mitigating risks. They should also ensure they have adequate insurance coverage to protect against potential risks.
- Staff Training: It is essential to train staff to recognise red flags and understand compliance requirements. This helps in identifying suspicious transactions and taking appropriate actions.
Red flags that may indicate suspicious transactions include clients who are anxious, nervous, evasive, or unreasonably demanding; clients making inquiries about ABF examinations or local security arrangements; and inconsistencies in the details of the importer or delivery address. Other red flags include clients who can only be contacted by email or mobile, clients keen to arrange their own collection from the port, and clients wishing to pay by direct deposit or cash for transactions that would typically be paid through the banking system. Brokers should also be wary of documents that appear altered or unprofessional, clients unable to provide proof of payment or illustrative material regarding the goods, and discrepancies or abnormalities in the weight, value, or description of cargo.
The cartage team should be vigilant in advising brokers about last-minute changes in delivery details and the condition of the cargo. They should ensure that delivery addresses are appropriate for the consignee’s business and check for unusual identification marks, odours, or delivery instructions. Drivers should also verify that the seals on Full Container Load (FCL) cargo match the bill of lading.
In summary, the critical role of due diligence and risk mitigation in the operations of customs brokers must be recognised. Through robust processes, thorough client verification, regularly reviewing internal systems, and training staff to recognise red flags, brokers can protect themselves from the risks associated with fraudulent activities and maintain compliance with regulations and the integrity of the customs brokerage process.
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