Understanding Bunker Fraud: How Can a Physical Supplier Collude with an Owner/Ship Manager to Defraud a Charter?

Friday September 30, 2016

With bunker fraud once again hitting both the headlines and the courts, some readers have expressed dismay at the apparent size of fraud in some of those cases that is reported to have taken place.

In one recent instance, this appears to have amounted to around 300 mt of bunkers per delivery, which given the average stem size in Singapore is around 1,100 mt this is clearly a sizeable proportion.

To better understand how this can happen, Ship & Bunker turned to industry expert Adrian Tolson, Senior Partner, 20|20 Marine Energy.

While being clear that it would be inappropriate to speculate on any specific case, Tolson explains one mechanism where such a fraud could take place is when an owner/ship manager colludes with a physical supplier to defraud a charter.

"Let's say the charterer orders 1,000 mt of fuel from a supplier. The supplier then makes a request to his bunker barge to deliver only 700 mt, 300 mt less than was requested by the charterer." explains Tolson.

"To do this the supplier and the barge crew will likely need to collude with the vessel's owner/operator and its crew, and also possibly even the charter's bunker buyer.  The vessel signs the BDR stating delivery has been made for the full 1,000 mt, allowing the supplier to bill the charterer for that full 1,000 mt.

"The supplier then has a profit from the 300 mt of fuel it charged for but never delivered, and then a negotiated share of that would be transferred to what seems like an unconnected third party company that is in fact controlled by the vessel owner/operator."

Following such a fraud, the vessel is then left with less bunkers onboard than it should, and the crew may then attempt to cover this up by subsequently recording greater bunker consumption than actually takes place. 

"It's possible this could go on for some time if the charterer's voyage performance calculations are not being done, especially if the bunker buyer is part of conspiracy," notes Tolson.

Bunker surveyors can of course be employed to counter such malpractice, and as part of its "Tricks of the Bunker Trade" series, Ship & Bunker has previously explored some of the implications of surveyors being asked to "bend the rules."