by Michael Laden

My last article, Importer Identity Theft: A Real Problem, was so popular that I have elected to revisit the topic again. In last month's article I talked about how easy it is for persons with a nefarious intent to literally steal an importer's identity and to create all kinds of havoc for the legitimate company. I also shared a few tips on how importers can protect themselves from this type of criminal activity.

 

This month, importer identity theft takes on a whole new darker look and feel that not only involves the criminal element, but also includes an internal conspiracy at U.S. Customs and Border Protection (CBP). I was recently made aware of a case where a bad actor within the hallowed halls of customs was selling or providing critical importer information to external sources for the sole purpose of stealing that importer's identity. The scheme was so sophisticated that the individual inside customs would search for active importers with similar products as the criminals so the fraudulent consignments would have a better chance of going undetected. In this particular instance it took the legitimate importer months of painful wrangling with CBP and attorneys to untangle and sort out the mess; it also cost thousands in fees and lost productivity.

 

My last article discussed what importers can and should do to protect their valuable names and reputation from abuse by thieves. The customs brokers and surety companies also have a role in this. However, it is my humble opinion that CBP should shoulder the brunt of the responsibility for detection and prevention of importer identity fraud.

 

Just like in cases of personal identity theft, the victim in this case is the legitimate importer or consumer. The customs broker or surety is similar to the merchant in this transaction, and CBP plays the role of the bank or credit institution. It is the bank that triggers the fraud alarm to the victim and acts immediately to shut down the suspicious activity. It is impossible for a customs broker, or surety company for that matter, to see such suspicious activity. Additionally, when individuals present themselves to a customs broker as a representative of a public company, the information is much easier to validate.

 

On the other hand, if the person claims to be representing a privately held company, their true identity is much more difficult for a customs broker to establish. This is especially true if there is an elaborate scheme in play to conceal a person or company's true identity. Only CBP has that vision and the ability to recognize and act on such anomalies. CBP is also an enforcement agency of the federal government and has access to all kinds of records and information that customs brokers, surety companies and importers do not. CBP has the ability to validate not only companies, but individuals and officers, too.

 

CBP also has a very robust computer system at their behest, and they are the single source that has all of the data at their fingertips. Furthermore, CBP is no stranger to sophisticated modeling and targeting programs; the state-of-the-art targeting system they use today to select inbound cargo for examination is testament to that. While I have no doubt that it will take some programming and cost some money (everything at the government always does), there's no reason that CBP can't develop and employ the same type of algorithms and modeling to mine the entry data they hold looking for identity theft.

 

CBP should also come up with ways to protect importers and their identities. One stop gap that might be considered is giving importers the ability to freeze their Importer of Record (IOR) number at the CBP Finance Center in Indianapolis, Indiana. That is to say, an importer could provide a written request to the CBP Finance Center to freeze or otherwise lock their IOR from change without specific approval from the company's corporate headquarters. Such a lock would prevent anyone else, even those with a valid Customs Power of Attorney, from filing a Special Address Notification (CF-4811) or an Importer ID Input Record (CF-5106) for that importer.

 

I seem to recall having the ability to do this very thing at the CBP Finance Center many years ago, but everyone I have attempted to verify it with looks at me like I have eight heads, so it must have been a dream. In any case, such a feature would not totally eliminate importer identity theft, but it would be a big step forward in prevention for those importers who elect to avail themselves of it.

 

One thing is for sure—importer identity theft has legs and is becoming more pervasive. CBP and the trade community need to work closely together to thwart this threat, but it is my opinion that CBP owns the majority of the responsibility and consequently should do most of the heavy lifting. In the meantime, importers, brokers and sureties must remain ever vigilant and constantly review transactions for suspicious activity.

 

Lastly, another very interesting case of import fraud revealed on July 25, 2012, involving $100 million dollars of merchandise and approximately $10 million in lost duties and revenue to the government can be found in this Justice Department press release at http://www.fda.gov/ICECI/CriminalInvestigations/ucm313527.htm.