Alertness: feed fraud
19 October 2017
Alertness required: feed fraud is dangerous and costly. A fraud incident can end up costing a company up to 15 percent of its annual turnover. Although concrete figures are not available, the number of fraud cases in the feed sector appears to be rising. GMP+ International, owner and manager of the GMP+ certification scheme for the feed sector, calls for more awareness and taking one’s own responsibility. ‘Investigate. If something is not right, talk to the supplier and find out where the issue comes from.’
The transporter and the manager shake each other’s hands. The truck with the supplies has arrived, just like every other Friday afternoon. But unlike before, the seal on the transport truck is broken. When the manager asks the transporter about it, the latter explains that – after spending a night in a parking lot – he checked whether the load was still complete. The manager has known the transporter for a long time and accepts his explanation. Time to unload.
‘Signals like these can point to fraud,’ Johan den Hartog, Managing Director at GMP+ International from Rijswijk (the Netherlands) explains. ‘When the supplier has agreed to deliver products in a sealed manner, the supplier should do so at all times. Do not accept any excuses, not even if it has never been a problem in the past. Call the supplier to account about it. An agreement is an agreement. The load may have been tempered with en route. Incomplete specification of company name on a bill of lading or purchase contract may also serve to mislead about the origin of the load.’
Fraud is deceit: the deliberate forging of products (or information), for instance by adding the wrong or forbidden products, with the aim of financial gain. Various incidents in the feed sector in the past were the result of fraudulent actions. Because fraud is concealed by the perpetrators where possible, not all cases are discovered, due to which there are no hard figures about the size of the phenomenon. But if the past has taught us one thing, it is that fraud will be discovered sooner or later and that it leads to scandals.
Den Hartog: ‘Fraudulent actions still exist and some players in the market still haven’t learned their lesson. They consciously take risks at the expense of others and for their own financial gain.’ At the same time, Den Hartog points out that matters that would traditionally be identified as safety issues, are nowadays referred to as fraud. ‘Experience has taught us to raise the bar.’ The increased importance of feed safety plays a large role in this. ‘The norms and values have shifted’, says Den Hartog. ‘Years ago, making manual changes to a delivery note would be accepted. Today, that is unthinkable.’
Not about catching criminals
When it comes to fraud, GMP+ International is not about catching criminals – the topic of fraud is not a specific element of the GMP+ certification scheme, unless it has direct and concrete consequences for the safety of feed. ‘Auditors aren’t investigating officers.’ GMP+ International mainly cares about awareness and about companies taking their responsibility.
‘Companies must always remain alert’, Den Hartog thinks. ‘If a product is offered at a price that is lower than the market value, then there’s reason for suspicion. If you suspect that you didn’t receive what you ordered or does the product have a deviating color or smell, carry out an analysis: are the specifications correct? Was the transport route different than the one agreed? Investigate. If something is not right, call the supplier to account about it and find out where the issue comes from.’
He emphasizes that this doesn’t have to involve a lot of work. Companies with a GMP+ certificate already have an infrastructure for crises in place. Every company has a crisis team for incidents with unsafe feed, as part of the Early Warning System (EWS). ‘Use your current processes to identify fraud cases in a timely manner’, Den Hartog recommends. If the fraud has consequences for the safety of the feed, participating companies are required to notify GMP+ International of this within 12 hours.
An error doesn’t always have to point at fraud. And fraud doesn’t always have to be in the same proportion as the European horse meat scandal of 2013. Still companies must be cautious, even with ‘small’ fraud cases, argues Den Hartog. ‘It goes beyond feed safety. Fraud can also be a strong clue for bigger problems within a company, such as chaotic business processes or financial problems. If that is the case, you need to ask yourself if you want to keep working with that supplier. Their problems will eventually become your problems as well.’
A critical mindset is also desired when the supplier isn’t the one who committed the fraud, but who became a victim of it. ‘A study shows that when a direct supplier is affected by fraud, the chances that your company will be a victim as well, increases. (Food fraud vulnerability and its key factors (Van Ruth, Huisman, Luning: Trends in Food Science & Technology, 67, 2017).’ And that can be a costly matter: a fraud incident can cost a company 2 to 15 percent of its annual turnover, a study from the food industry shows (Consumer Product Fraud and Deterrence, Grocery Manufacturers Association, 2010).
In the sector, the dialogue about fraud is gaining traction, the Managing Director of GMP+ International observes to his satisfaction. The organization played a role in that by publishing an information document about fraud. This document, drawn up in collaboration with professor Food Authenticity Saskia Ruth of Wageningen University, contains tools and directions that help companies identify fraud. For instance, certain products, processes and regions are more vulnerable to fraud than others (liquid products are easier to forge than solid products).
Den Hartog: ‘Circumstances in a country or region of origin, may motivate companies to commit fraud. A high level of corruption and poverty increases the risk of fraud as well.’
In case of doubt, companies can investigate organizations in a targeted manner, for instance by checking independent sources such as RASFF notifications (At hazard, select: adulteration/fraud), the database of the US Pharmacopeial Convention, scientific publications, GMP+ EWS notifications, GMP+ newsletters, reports published by bodies or news in the media. In addition, the Transparency International Corruption Perception Index and the Multi-dimensional Poverty Index give companies an idea about the level of corruption in a certain region.
Suspicion is not necessary, Den Hartog says. Alertness however is. ‘Fraud can have a major impact on a company. The question ‘Am I properly prepared?’ is one that every company should be asking itself consistently.’