"ICC Warning Letter" Analysis

An Expert's View about Business Practices in the United States

Posted on: 22 May 2012

The "ICC Warning Letter" is not from the ICC at all. There is more to make it a bad option for trying to stop fraud.

THE « ICC WARNING LETTER » Mark Kleinschmidt Harmony Imports May 14, 2012 INTRODUCTION Fraud is on everybody’s mind these days. Sellers are afraid to release any documents because, if the buyer isn’t a real buyer, they can take the documents and fraudulently present them as if they were the seller. On the flip side, a buyer doesn’t want to send their documents, because a fraudulent seller could take the buyer’s docs and use them to buy fuel. As a result we have a stand-off, and nobody wants to go first. So what’s the solution? There is one solution that most definitely is NOT the right way to go. But, first the disclaimers: 1. I am not an attorney, paralegal or lawyer. I do not offer legal advice. The opinions in this whitepaper are my own opinions, and should not be construed as legal advice. 2. I am a citizen of the United States of America. My education is entirely US based. As such I am familiar with US commercial law. 3. I absolutely do NOT endorse the “ICC Warning Letter”. Its inclusion here is for illustrative purposes only. Further I do not claim that this letter is an official document of the International Chamber of Commerce, ICC. THE LETTER In Appendix 1 is an example of the “ICC Warning Letter”. I have included all the letter head so that you can get the full effect. The text of the letter follows: “ WARNING LETTER FOR BUYER AND SELLER (APRIL , 2012) This is a very important message to anyone involved in the commodities industry on the new measures with respect to Buyers and Sellers conducting transactions. From now on, if an ICPO, LOI, RWA, or BCL is issued and the document is not real, true and/or actually verifiably factual, the Buyer will be able to inform the FBI, ICC, and INTERPOL. In addition, after an FCO is sent to the Buyer, there should be a formal answer to Seller from Buyer in a timely manner in accordance with the agreement between parties. Harmony Imports May, 2012 ICC Warning Letter Analysis If there is no response from the Buyer in a timely manner, the buying company will be reported to the FBI, ICC and INTERPOL. If this action is repeated by sellers, they too will also be reported for abuse of the NCND, LOI, ICPO, AND RWA OR BCL, FOR THIS IS NOW A FEDERAL OFFENSE. It is important to transmit this to all clients that work with providers that are members of the ICC, FBI, and other international organizations. From this point forward, the international codes will be strictly enforced to exclude all intruders that send or transmit false information. Those who submit a false NCND/IMFPA, LOI, ICPO, RWA or BCL, or FCO, as well as FALSE PROOF OF PRODUCT (POP), FALSE PROOF OF FUNDS (POF) WILL BE CHARGED WITH A CRIME. This offense went into effect on November 15, 2008 after a meeting was held between the Federal Reserve, European Central Bank, Interpol, Federal Bureau of Investigation and Central Intelligence Agency. The reason for this measurement is to protect the commodities industry which is a fundamental part of the world’s economy. I have read and understood the severity of the warning above and do realize the serious impact that pertains to all oil and other commodities transactions. “ Now, let’s take a look at the problems with this letter. WHATS WRONG WITH IT 1. It’s not an ICC letter. In April of 2011, I wrote to the ICC for their comments regard the letter in question. The top email is my request to them, followed by their response. -----Original Message----- From: mark@harmonyimports.com [mailto:mark@harmonyimports.com] Sent: 03 April 2011 15:17 To: icc Subject: "Official" ICC Warning Letter I recently received a request from a seller to pass on an "Official ICC Warning Letter". After reading the letter I could not believe that the ICC would be responsible for such a letter existing. I am requesting confirmation from you that the letter is really an ICC creation made available to the trading community. I will be glad to provide a copy of the letter to you. My email address is: mark@harmonyimports.com. Regards, Mark Kleinschmidt Harmony Imports Oakland, Maine USA Subject: R E: "Official" ICC Warning Letter Date: T ue, 5 Apr 2011 10:14:30 +0200 From: ic c To: < mark@harmonyimports.com> Page: 2 Harmony Imports May, 2012 ICC Warning Letter Analysis CC: F IB Dear Mr Kleinschmidt, Thank you for your message. Indeed, this has nothing to do with our organization. You may wish to see the following: http://www.iccwbo.org/id9606/index.html and http://www.iccwbo.org/icccihag/index.html Regards, ICC Information Services This alone invalidates the letter. But, even if the ICC letterhead and the other logos are removed there are problems with this letter that makes it a complete fraud. 2. Being reported to the FBI. The FBI is a national level internal law enforcement agency. They will not take complaints filed by a citizen of another country even if it involves a US citizen or company. So, this threat would only be applicable to domestic transactions between US parties. 3. Being reported to the ICC. This is the most credible threat in the entire letter. The ICC, while not a law enforcement organization, does have a criminal activities branch that does maintain a very credible blacklist. 4. Being reported to Interpol. Interpol is an international organization of police forces. They do not take complaints from private citizens and businesses. An attempt to report a fraudulent buyer or seller would most likely result in a request to file the complaint with your local police. So, a threat of being reported to Interpol is an empty threat. 5. “In addition, after an FCO is sent to the Buyer, there should be a formal answer to Seller from Buyer in a timely manner in accordance with the agreement between parties.” Unless there is an agreement like a Memorandum of Understanding or Agreement on Procedures that was signed by both parties prior to the issuance of the FCO, then there is no “agreement between parties”. A second issue with this statement is that a “timely response” is subjective. What is “timely” in one country, may be totally inappropriate in another. It’s not a crime to ignore another person or company. It’s not nice to do this, but it’s not a criminal offense. 6. It is important to transmit this to all clients that work with providers that are members of the ICC, FBI, and other international organizations. From this point forward, the international codes will be strictly enforced to exclude all intruders that send or transmit false information. Those who submit a false NCND/IMFPA, LOI, ICPO, RWA or BCL, or FCO, as well as FALSE PROOF OF PRODUCT (POP), FALSE PROOF OF FUNDS (POF) WILL BE CHARGED WITH A CRIME. The FBI is not a membership organization. Why should we restrict the distribution of this letter to “providers that members of the ICC”. These are the ones that most like know how to do business. It’s all the other businesses and brokers out there that are in greater need of the reminder. Finally, in the final sentence comes a totally empty threat. It is not our place to tell people who will be charged with a crime. Indeed in most places even the police don’t charge people with crimes. That job is left to the Page: 3 Harmony Imports May, 2012 ICC Warning Letter Analysis legal representatives of the government. All we can really say is that a complaint will be filed against those who present false documents. 7. This offense went into effect on November 15, 2008 after a meeting was held between the Federal Reserve, European Central Bank, Interpol, Federal Bureau of Investigation and Central Intelligence Agency. This meeting never took place. None of the referenced organizations have even passing notice in their news pages from the period predating November 15, 2009. No independent news agencies that I was able to check have any reference of such a meeting. Now, a quick look at the agencies that met. First I will not say that the organizations mentioned are not concerned about fraud. However, with two exceptions, the interest is certainly not mainstream to the organizations. The Federal Reserve and European Central Bank are banks establishing monetary policy. The Central Intelligence Agency is a “spy” agency. The FBI is a national level law enforcement agency. Any interaction at the international level would take place with the Department of Justice or State. So, this paragraph is flat out false. IN GENERAL – The letter was clearly written by somebody with marginal English language skills that is trying to sound very official. The letter is very US-centric, and would be most applicable to US companies and individuals. In short, the letter is a joke. WHAT IS A BETTER REPLACEMENT Fraud is rampant in the industry. There is no denying the need for a statement regarding fraud so that there is clear understanding of the consequences of committing it. What we need is a better letter. The letter I have drafted for my own use does not over promise, and states clearly possible consequences for presenting a fraudulent document. The letter is in the Appendix 2. You are free to take the letter and use it for your own without license or royalty. I make no claims as to suitability of purpose. I am not a lawyer and will not derive compensation from your use, therefore I bear no liability for its use. I would sooner urge you use the letter as an example, and write your own letter. Whatever letter you do use, please have it reviewed, or written, by a competent attorney for your locale and trading sector. WHAT TO DO IN THE EVENT YOU ARE A VICTIM OF FRAUD We have talked about warning people about fraud. Now what do you do, if despite the warnings, you still fall victim to fraud. (Stay in this business long enough and you will.) This subject is intended to give you a few ideas about what to do. To thoroughly cover the topic would take many hundreds of pages, and would require a person with far greater knowledge than I possess. The first thing to do is to decide if you are going to do anything about it. Know that whatever you do, it is going to be a long road to get any satisfaction. Criminal cases are slow if they happen at all. Civil litigation takes a long time to be settled and can be quite expensive, especially if you need to file the law suit overseas. Sometimes it is helpful to seek the advice of an attorney in trying to decide what to do. Page: 4 Harmony Imports May, 2012 ICC Warning Letter Analysis Before talking to an attorney or the police take all the emails, IM chat logs, documents and letters and put them all together in one place. Then build a timeline referencing key correspondence and people that may act as witnesses. Have it with you when you talk to the attorney. It will help him/her give you better advice. If you have the documentation to support your claim of fraud, but not enough to prove it legally, there is another option. You can blacklist the offender. This is not something to do lightly. If you are wrong, you expose yourself to possible legal action. So, be sure. There are numerous websites used to blacklist people. The ICC maintains a blacklist. If you start putting out fraud alerts, you will need to be prepared to justify your actions. Take the documentation you have collected, and strip it down to the bare essentials for demonstrating the fraud. Finally, you have the option to walk away, and not do business with the person or company again. Share your experience informally at appropriate times, and let time show the offender for what they are. CONCLUSION / CALL TO ACTION The “ICC Warning Letter” is a very bad example of how to warn people against fraud. Moreover it fraudulently represents itself as a document put out by the ICC. Using this letter and requiring it be signed by buyers and sellers only perpetuates the fraud. What can we, as a community, do about this letter? 1. Stop using it. And, when asked to pass it on to a buyer or seller, inform the party requesting it be signed that the letter is a fraud and that you will not support its use. 2. Come up with a better letter. No denying the need for the letter, but let’s put together something that is truthful, accurate and promises exactly what can be consequences for a serious problem. 3. The hardest and most desirable action would be to eliminate the need for the letter entirely. But as long as the barriers to entry remain low, law enforcement remains uncoordinated in the effort, and there remain safe havens for the criminals, the problem will exist. Page: 5 Harmony Imports May, 2012 ICC Warning Letter Analysis Appendix 1 – “ICC Warning Letter” example International Chamber of Commerce Federal Bureau of Investigation INTERPOL IP Crime Unit INTERPOL General Secretariat 38 Cours Albert 1er 75008 Paris, France J. Edgar Hoover Building 200, quai Charles de Gaulle, 69006 Lyon, France Tel +33 1 49 53 2828 W.Washington, D.C. 20535-0001 Fax: +33 (0) 4 72 44 72 21 Website: www.INTERPOL.int 935 Pennsylvania Avenue Investigations@fbi.gov http://www.fbi.gov/majcases/fraud/fraudschemes.htm Fax: +33 (0) 4 72 44 72 21 Website: www.INTERPOL.int WARNING LETTER FOR BUYER AND SELLER (APRIL , 2012) This is a very important message to anyone involved in the commodities industry on the new measures with respect to Buyers and Sellers conducting transactions. From now on, if an ICPO, LOI, RWA, or BCL is issued and the document is not real, true and/or actually verifiably factual, the Buyer will be able to inform the FBI, ICC, and INTERPOL. In addition, after an FCO is sent to the Buyer, there should be a formal answer to Seller from Buyer in a timely manner in accordance with the agreement between parties. If there is no response from the Buyer in a timely manner, the buying company will be reported to the FBI, ICC and INTERPOL. If this action is repeated by sellers, they too will also be reported for abuse of the NCND, LOI, ICPO, AND RWA OR BCL, FOR THIS IS NOW A FEDERAL OFFENSE. It is important to transmit this to all clients that work with providers that are members of the ICC, FBI, and other international organizations. From this point forward, the international codes will be strictly enforced to exclude all intruders that send or transmit false information. Those who submit a false NCND/IMFPA, LOI, ICPO, RWA or BCL, or FCO, as well as FALSE PROOF OF PRODUCT (POP), FALSE PROOF OF FUNDS (POF) WILL BE CHARGED WITH A CRIME. This offense went into effect on November 15, 2008 after a meeting was held between the Federal Reserve, European Central Bank, Interpol, Federal Bureau of Investigation and Central Intelligence Agency. The reason for this measurement is to protect the commodities industry which is a fundamental part of the world’s economy. I have read and understood the severity of the warning above and do realize the serious impact that pertains to all oil and other commodities transactions. BUYER SELER NAME NAME TITLE TITLE PASSPORT No PASSPORT No SEAL & SEAL & SIGNATURE SIGNATURE Page: 6 Harmony Imports May, 2012 ICC Warning Letter Analysis Appendix 2 – Fraud Warning Letter example FRAUD WARNING LETTER Dear Sirs and Madams: This warning letter is an attempt to impress upon both parties the seriousness of misrepresentation of facts as presented in any documents relevant to the transaction you are working on together. “Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.” - http://definitions.uslegal.com/f/fraud/ To the seller - It is fraud to present an offer to sell a product that you do not have or provide a service you are not qualified to provide, to incorrectly specify the properties of the product, or to omit information that would influence the decision of the buyer whether or not to buy the product. To the buyer – It is fraud to present yourself as a legitimate buyer when you do not have the resources or intent to complete. To both the buyer and seller – It is fraud to present information or promise to any broker in a transaction with the intent of circumventing the broker or brokers at any time during or after the contract has successfully been concluded. It is equally an act of fraud to cancel or terminate negotiations with the intent of restarting them without the brokers’ participation. If any party is found to have committed fraud by any other party in the transaction, civil and criminal remedies are possible. After attempting to address the actions through negotiation and direct contact a criminal complaint may be filed with appropriate law enforcement agencies in any and all jurisdictions of parties involved. Complaints may also be filed with the diplomatic missions of the parties involved in all countries with parties involved. The injured party or parties may expose the fraud publicly by various means. Finally, the injured party or parties may seek legal recourse in any civil court of competent jurisdiction. By signing this letter you indicate that you understand the consequences of committing fraud, and affirm to deal fairly and honestly with full disclosure of facts that would influence the other party’s decisions with regards to your products and service. For the Buyer – For the Seller – I am authorized to commit the buyer to legal I am authorized to commit the seller to legal agreements and courses of action. agreements and courses of action. Signed: Signed: Title: Title: Date: Date: Page: 7
Posted: 22 May 2012

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