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Category Archives: fraud

10 SIMPLE STEPS NOT TO BE HIT BY FRAUD

  1. Always treat newly-formed firms and new accounts with suspicion, beware of a new client trying to place a large order for their first or second order
  1. There are certain styles of business names long firm fraudsters seem to favour. Beware of the words, Euro, International, Worldwide, Wholesale, Trading and Distribution, please air particular caution to these types of businesses
  1. If the trader has been a long-established company, beware of rapid change in Directorship, Company Secretary etc. These indicate the company has changed ownership, and may have been hijacked by fraudsters to obtain credit
  1. Use a recognised credit reference agency to check the company or individual out in detail. If the company has submitted accounts to Companies House, check the dates match and the firm of accountants who submitted the accounts actually exist
  1. Check with the landlord of the premises and neighbouring businesses to confirm the length of occupancy.
  1. Ensure receipt of original paperwork – never accept copies or faxed documents. Do not accept hand-written faxed orders for goods
  1. Ask for Trade References, don’t just call the number supplied and ask them to supply you with information. Goggle map the business to check it actually exists and again ask neighbouring businesses how long they have been there for.
  1. When following up a Trade Reference ask unusual questions like, Have you worked with this Company at any different addresses? Have they changed their names? How well do you know them? (If the person at the end of the phone is hesitant they are usually working from a script, which wont include questions like this)
  1. Check the company has a website, and it looks genuine, there should be no spelling mistakes, and should relate to the business they carry out. If the website looks very basic, carry out more checks
  1. Fraudsters very rarely have company email addresses, they are usually linked to Yahoo, AOL, and Hotmail Accounts, if this is the case your suspicions should be aroused straight away

Long Firm Fraud

The Kray Twins – Dead But Not Forgotten?

250px-Krays

Credit managers throughout the United Kingdom have reported that there has been an increase in “long firm” frauds in the last few months. This type of

fraud was created by the Kray twins in the East End of London in the early 1960s and was the mainstay of their criminal empire. These types of frauds are generally run over a “long” period thus the first part of the name. The second part of the name comes from the Kray’s gang who were known as the “Firm”.  A “long firm” fraud is where a fraudster sets up a business and pretends that they are a bona-fide trader who will pay accounts on demand. This induces manufacturers and wholesalers to supply goods on credit when in fact there is no intention to make payment. The fraudulent concern is normally a limited company that has been purchased online from formation agents. The company is registered with Companies House with the directors being bogus often lodging false accounts to show a couple of years of successful trading when in fact the company has only been trading a matter of weeks. In other cases sole trader or partnership businesses are used for the scam.

Any marketable commodity can be the subject of fraud although certain goods are preferred because they are not easily traceable. Toys, toiletries, wines & spirits, fancy goods, confectionery and building materials all have a quick turnover and can be disposed of easily. High value audio/visual products, computer products/components and peripherals printer cartridges, mobile phones, furniture and high-class merchandise including clothing, branded accessories and sports goods are often the subject of these frauds too. It is fairly apparent in a number of cases that the fraud has been executed with a specific shopping list in mind to cater for the demand from existing outlets.

The fraudsters visit Trade Shows throughout the UK and Europe with a view to opening accounts and obtaining goods on credit. Telephone sales have increased dramatically over the years due to constraints on all businesses to deliver quickly and move the business forward and fraudsters have taken full advantage of this. They also use the internet as it removes direct contact with the supplier and the traditional benefits of customer contact – i.e. speaking to an individual who sounds unprofessional, or who does not understand the product and price relationship. The size and type of premises they operate from will depend on the quantity and category of goods and services to be handled. With goods that turnover very quickly such as beer, wine, and spirits, all that is needed is enough room to unload. In most cases, regardless of the commodity, the goods do not stay on the premises very long. Premises where the good are to be delivered are generally rented on a short term basis. Extreme care should always be taken when dealing with businesses operating from accommodation addresses. It is widely known that accommodation addresses tend to provide cover or a base for a cross section of criminal activity, not just white collar crime. Long firm fraud is organised crime on a large scale and in most cases is drugs related and have been know to fund terrorist activities in the past.

How can you prevent being a victim in a long firm fraud?

  • By putting a few simple measures in place businesses can reduce their chances of being the victim of a fraudster.

Check out the Customer

    • Always treat newly-formed firms with suspicion
    • Identify the directors/partners
    • Obtain details of who trades with them
    • How long have they been in business?
    • How long have they traded from the present and past business addresses?
    • Are the premises owned or leased.
    • Are the premises occupied? Fraudsters often only occupy their business premises when they are expecting a delivery.
    • Visit the premises or arrange for a local agent to visit them for you. Fraudsters deliberately target suppliers who are not local to the business to avoid such visits.
    • Have the directors/partners been involved in any previous business? If so, obtain details of involvement, number of years traded, previous references, bankers premises etc.
    • If the trader has been a long-established customer, beware of rapid change in personal and trading contacts. These may indicate the company has changed ownership.
    • Consider the type and range of goods traded in.
    • Cold calling on the new customer’s premises adds an extra safeguard. It will give you a feel for the customer. It also allows you to gain first hand knowledge – identify persons involved – confirm the main line of the business and the type, range and quality of goods held.
    • Checks with the landlord of the premises and neighbouring businesses will confirm the length of occupancy.
    • Are the premises large enough for the proposed business?
    • Are the premises being used mainly as a delivery point?
    • Visit references to authenticate background knowledge, previous trade and confirm reliability.

Protect Your Financial Position

      • Ask for part payment in advance
      • Make part deliveries
      • Ask for personal guarantees
      • Be wary of supplying additional orders if previous payment not received
      • If your salesperson / business representative has personally attended at the premises and is of the opinion that the proprietor or business appears suspect, take advice and supply only on a cash basis, if at all!
      • Ensure the sales and credit control functions liaise regularly

REMEMBER!

Fraudsters are devious, cunning and plausible. Don’t believe all you are told without checking first.

By putting a few simple measures in place, you can reduce the opportunities for the fraudster to operate