How would an Auditor track or trace a fraud in an import / export transaction??

Marking of Products The first pillar is the marking of legitimate production. By marking I mean the application of a means to authenticate that the product is genuine or show it is fake, and also to record production details. The two most widely used marking techniques are:First, secured tax stamps. To resist counterfeiting, tax stamps must have multiple levels of security features (visible, semi-covert, covert and forensic) and bear a unique code associated to metadata recorded in a database.Second, direct marking, which consists of printing a unique code on each product with visible and/or invisible inks. To be robust, useful and efficient, both marking techniques have to combine material-based security and information-based security. They also have to be suitable for high-volume production lines, such as those used to manufacture cigarettes, beer or soft drinks, with no impact on production speed. Widely deployed marking is essential to ensure reliable tracking and tracing of these products through transport and storage up until final purchase by consumers. Marking prevents under-declaration by manufacturers. Effective marking systems eliminate the damaging “garbage in, garbage out” phenomenon well known to systems managers – marking and on-line activation ensure fully accurate measurement of production and the data is transmitted in real-time to the central database. For full efficiency, both imported products and exported products should also be marked to fight against well-known frauds. (To be complete I should also mention a third marking system using RFID technology. But because of its high cost and the high volumes it is not really suitable for unit marking.)

Distribution Chain Tracking Functionalities The second pillar relates to the Track and Trace functionalities. As soon as excise products are uniquely marked at production or importation, their logistical and fiscal life can be reliably tracked and traced. To do this it is necessary to capture events along the distribution chain from the manufacturer or importer to the point-of-sale. The most significant events are:    The transfers of ownership of the excise products.    The monitoring of excise stocks.    The aggregation of products from packs to cartons, pallets or containers. The entirety of all data associated with the unique product marks is captured in a central database where data are exclusively owned by the government. In addition, the system incorporates data relating to the authorised economic operators active in the excise supply chains. By applying the principles of the four pillars of secure Track and Trace Legitimate trade becomes visible all along the chain, from manufacturers to end consumers.    Law enforcement administrations are equipped with reliable and consistent data and tools to accomplish their mission and to immediately sanction fraudsters.    Illicit trade is significantly impacted.Auditing and Authentication The third pillar consists of auditing and authentication tools to detect if excise products have valid marks or stamps. Such tools, operated by law enforcement agents at border posts or inland, detect covert security features immediately and connect in real-time to central databases to retrieve instantly product and production details. This immediate interaction with reliable data is essential for checking unique codes and identifying potential frauds.In addition, retailers may utilise simple authentication tools for quick “good versus fake” identification. These auditing devices today aggregate a large amount of field evidence. This reinforces the visibility and credibility of the distribution chains. It provides assurance and immediate reaction capabilities to law enforcement agents and to retailers about excisable products offered on the market.Data Intelligence on Trade The fourth pillar is the consolidation of excise trade data to provide meaningful business intelligence, risk profiling and powerful reporting tools. Excise trade data is transferred seamlessly from the marking, tracking and tracing systems mentioned above.As long as all excise products produced in a country or imported are marked, and as long as their distribution and authentication are controlled in a reliable way, the government, the Ministry of Finance and the Customs services have the means to tackle excise fraud. Thanks to the authentication tools, the central database and the data on each marked product, it is possible to calculate the probabilities of fraud at the points-of-sale or for the next consignments. Thanks to an efficient risk management and profiling system that can make use of a massive volume of excise data, Customs, Tax and Revenue authorities can better direct their resources against excise frauds, and benefit from ad-hoc fraud pattern reports.