Analysis: Fighting back against fraud in travel

Analysis: Fighting back against fraud in travel

As the UK economy sinks deeper into recession, travel companies are faced with fears of weakening demand, lack of credit or, at worst, company failure.

But there is another growing threat that’s often forgotten: fraud.

Risk specialists expect a steep rise in fraud over the next year as the world’s economy continues to suffer. Businesses struggling to stay afloat during hard times can easily fall prey to all kinds of fraud and scams. It is more important than ever for agents to be aware of fraudsters.

Febraury 2009 is Fraud Awareness Month on Travel Weekly

Over the next four weeks, Travel Weekly’s Fraud Awareness Month will bring you news and analysis on travel fraud and offer advice from industry experts.

The month leads up to the official launch of Operation PROFiT (Prevention of Fraud in Travel) on February 20.

Led by Teletext chief of compliance Barry Gooch and ABTA head of finance Mike Monk, the group will set industry standards and seek to help companies protect themselves against fraud.

Last year’s conviction of four fraudsters who set up a string of bogus travel agencies was the result of an industry-wide clampdown on fraud.

In the first week of Travel Weekly’s Fraud Awareness Month, we look at the aftermath of the conviction and ask experts for advice for travel agents safeguarding against fraud.

The fraudsters

Last year a gang of four fraudsters were jailed for a total of 18 years for ripping off thousands of holidaymakers to the tune of £20 million.

The group set up a string of agencies, both retail shops and online, and sold high volumes of discounted holidays before disappearing with the money.

In some cases the gang established new companies, while in others they targeted existing agencies which had been struggling to stay afloat.

Thousands of customers were left empty-handed and ABTA, the Civil Aviation Authority and credit card companies paid out millions in compensation.

The ringleader, 64-year-old Christakis Philippou, launched an appeal in May last year.

The conviction of a travel fraud suspect known to the police since the 1980s appears to have had a far-reaching effect.

ABTA head of finance Mike Monk said: “I haven’t seen a fraud of this kind since the gang was sent down. Before that we heard of at least one a month. I think it has sent a message to the fraud community and people have taken a step back.”

Vulnerable agents

However, the downturn in cases of fraud may not last long. During the recession, agency owners must be even more wary of ‘too good to be true’ offers from people looking to buy or invest in their business, advised Monk.

“Agents who are looking for a way out of their business could be tempted to get involved with these fraudsters, who will often present themselves as missionaries”

These tricksters will look to invest high sums of money in your business, or buy it out by paying in stages, he said. They will often insist that the regulator, such as ABTA or IATA, is not informed of the change. The agency owner can then find themself in the firing line when the trickster has disappeared.

“Agents who are looking to retire or are struggling and looking for a way out of their business could be tempted to get involved with these fraudsters, who will often present themselves as missionaries or church men,” said Monk.

“My advice is to speak to ABTA if you have any concerns and get everything overseen by a lawyer. Remember: if it’s too good to be true, it probably is.”

In the case of Top Flyers (see case study, below), the fraudsters set up the business themselves. However, in many bust-outs, the culprit approaches an existing IATA agency. “They target people who advertise as selling their business and they go in and make an offer, often more than it’s worth,” said Sears.

“The seller might agree to take money over a period of time and he hangs on to the shares in the meantime and doesn’t notify ABTA or IATA that there has been a change of ownership.

“When everything hits the fan, they can remain personally liable. It’s like handing over the keys to the Crown Jewels.”

Vetting staff

In some cases, fraudsters will target agencies from the inside.

The fraudsters infiltrate the company by securing a job and gaining access to a company’s information.

“It is difficult for small companies because they don’t expect it,” said ABTA head of finance Mike Monk.

“Call centres are especially vulnerable. Anyone who is involved in the financial side of the business should be vetted.” Travel agents should exercise vigilance as there has been a spate of such cases recently.

Tips for call centre owners

Without vetting, it can be easy for criminals to infiltrate call centres and pose as staff. The Serious Organised Crime Agency provides the following tips on how to weed them out:

  • If practical, vet staff before employment begins.
  • Vet according to level of access to data, not position.
  • Learn from mistakes. If your company is infiltrated, check back to the recruitment process and see where the danger could have been detected.
  • Consider further reviews of staff who move into new roles or get more access to data.
  • To tighten up your recruitment procedures, use the Credit Reference Agency or police checks.

Case study: Top Flyers bust-out

The case of travel agency Top Flyers cost the airline industry £1.2 million last year. The agency was set up near London’s Tottenham Court Road in May 2007 and operated legitimately for nine months.

The owners then operated what is known in the industry as a ‘bust-out’. This is when an agency orders a large number of first and club-class tickets from airlines. They then sell these tickets at discounts of 50% through their contacts.

Bust-outs usually take place over a weekend, often just before a bank holiday. On the Monday morning, the owner disappears with the money and leaves the agency without the funds to pay the airlines.

Many of the customers will have bought the tickets in good faith, but there will be others who are well aware they are obtaining valid tickets at a hugely discounted price.

Trevor Sears, who acts as legal counsel to IATA and is a partner at law firm Davenport Lyons, explained: “When this happens, the airline will blacklist the tickets.

“People who have paid full price will be able to fly but those who haven’t will be asked to pay the balance at check-in. Often people don’t turn up for their flight because word has gone round that the tickets have been blacklisted.”

The police were notified but have not yet been able to track down the fraudsters behind the Top Flyers bust-out. They are thought to have left the country soon after the fraud was committed.


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