Theft of fuel from HMS Bulwark – a diversion case study

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Paul Curwell

What happened?

This story broke in the media on 7 April 2022, with multiple articles claiming the theft of fuel from a high security Royal Navy base in the United Kingdom. According to Sky News, “the diesel was siphoned from a tanker in a heist that reportedly “ran for weeks” with most of it having been “flogged on the black market”. Some articles claim the fuel was being used to run diesel generators on HMS Bulkwark whilst it is alongside and undergoing refit.

HMS Bulkwark, Albion-class assault ship, Royal Navy, United Kindgom

Further details on the case are limited, other than the fact that the case is under invetistigation by the UK Ministry of Defence and that the alarm was drawn when a guard at the base became suspicious. Unfortunately the theft of fuel is a common occurance – as a perisable commodity which retains its value in the market, fuel is in high demand and can be readily converted to cash when diverted even in small quantities, or alternately consumed for personal use.

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A case of diversion or shrinkage? Motive is key

The fact that fuel was stolen means this is an offence of theft, or potentially fraud depending on whether deception was used to perpetrate the crime. Given events took place on a secure military base where it is reasonable to assume you cannot simply walk in or out, it is reasonable to assume an element of deception (i.e. fraud).

Either way, whilst details are limited in the public domain it is possible to develop further insights into the crime for the purposes of building this case study. For example, we know this scam went on for weeks. According to Wikipedia, the capacity of a fuel tanker truck ranges from 20,800 to 43,900 litres. Google reveals that the average capacity of an SUV on the road is up to 70 litres.

To provide an order of magnitude, 2% of 43,900 litres is 878 litres, which equates to around 12.5 full SUV tanks. If this scam was perpetrated once a day for 7 days, we are talking about over 6,000 litres of diesel being stolen each week. With current Australian diesel costs averaging $1.95 per litre as at 14 April 2022, this equates to illicit earnings of just under AUD$12,000 per week (AUD$624,00 per annum). To be clear, there is no indication of quantum or order of magnitude in the media, so this is hypothetical and indicative only.

AA van with Jeep SUV broken down in Kensington Gardens by David Hawgood is licensed under CC-BY-SA 2.0

So does this activity equate to shrinkage or diversion?

  • Shrinkage is an accounting term used to describe when a store has fewer items in stock than in its recorded book inventory (Shopify). Shrinkage can be the result of process or quality issues, as well as theft and fraud.
  • Product Diversion refers to goods that are redirected from the manufacturer’s intended area of sale or destination to a different geography or distribution channel (Curwell)

In practice, I tend to view shrinkage as being less organised and not ‘commercial’ in scale, whereas diversion is typically more organised and more commercial in nature. Given this has been going on for weeks as well as the volume and illicit revenue estimates outlined above, I would suggest this is clearly a case of product diversion. Further, in my taxonomy of product diversion risks, this is defined as “Product stolen from distribution or supply chain“.

How can these types of product diversion events be detected generally?

Product diversion shares similarities with other frauds. According to the Association of Certified Fraud Examiners (ACFE) Occupational Fraud 2022: Report to the Nations study:

  • 42% of business frauds globally are detected via tip offs,
  • 16% through internal audit, and,
  • 12% through management review.

Interestingly, 5% of cases were detected by accident – exactly how the Royal Navy guard discovered this diversion incident.

When you know what you are looking for, the application of fraud analytics techniques means product diversion can be detected provided you have the right data and you assemble and analyse this data in a manner that will allow you to identify potential indicators of diversionary activity.

Photo by Lou00efc Manegarium on Pexels.com

From my understanding of the situation, there are at least four primary records that, when ‘joined‘ together, could be used to identify similar product diversion cases pertaining to oil and fuel:

  • Order records – invoices and purchase orders should state the quantity of fuel ordered and the delivery dates. Given this is a military base, there are likely to be some sort of movement records to register in advance the potential delivery.
  • Tanker truck records – records of how many tanker trucks entered the base and their capacity (this might be captured at the front security gate for emergency management reasons in case of fire).
  • Fuel transfer records – these should record how much fuel was actually delivered from the tanker to HMS Bulwark, and would likely be maintained by the driver or the fuel tanker company’s order delivery system (most likely a smart phone app). Requirements to supply these to the customer could be mandated in the contract of sale.
  • Fuel receipt records – these would be maintained by the crew of HMS Bulwark, recording all details of the delivery including fuel quality records through onsite Quality Assurance testing performed by the ship’s engineers as well as the quantity of fuel recieved.

These four datasets could be collected by customers and monitored on a proactive, ongoing basis to identify discrepancies indicative of potential product diversion using data visualisation tools such as Tableau or even Microsoft Excel. Alternately product diversion schemes such as this may also be identified during distributor audits or compliance investigations.

What other preventative and detective controls might be relevant in this scenario?

In addition to the data points outlined above, a range of other preventative and detective controls could be used to identify potential diversion. These measures may be more expensive than the ‘books and records’ approach outlined above, hence their application should be risk-based. Relevant examples include:

  • Accurate calibration of measures to calculate the volume of fuel delivered – just like petrol stations, fuel delivery measures need regular re-calibration, and in some instances may be tampered with to under- or over- deliver. There may be two such devices in this example – (1) the tanker truck and (2) HMS Bulwark.
  • Quality checks should be performed by the customer to ensure the diesel is appropriate quality and that product substitution has not occured (e.g. fuel diluted with another substance, fuel sitting on top of a heavier substance to give the appearance of conformance).
  • GPS monitoring on the tanker truck allows both the vendor and customer to monitor for unscheduled stops, which could be indicative of an accident or unscheduled delay, cargo theft (e.g. hijacking), or collusion with organised crime elements. These systems typically generate an alarm or alert in an operations centre.
  • IOT sensors may also be attached to fuel lines or guages, to confirm quality and volume of product in real-time as it is decanted from the tanker to the fuel storage tank.
  • High-value or sensitive facilities should be subject to a range of physical security measures.
  • Third parties loitering in a secure area, either pre- or post-fuel delivery, are also indicative of suspicious activity that would warrant further investigation (as allegedly occured in this case)

As you can see, the Internet of Things (IOT) and the proliferation of sensors in daily life provide excellent opportunities for detecting product diversion in near real-time.

Lessons learned – what to do about it?

Performing a thorough anti-diversion risk assessment, and then implementing appropriate detective measures to identify potential diversion incidents early, before any substantial loss is the foundation of a proactive approach to managing diverison risk. The data required for detecting this type of diversion is likely to be readily collected in most organisations, and simple tools such as a spreadsheet can help identify anomalies. Detecting diversion in your data can be easy and cost-effective when you know what to look for.

Further Reading

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