There are two main types of fraud that, unfortunately, are on the rise and are often come across by our claims teams: short firm fraud and buyer impersonations. Short firm fraud is the more common of the two and is when a business is set up with the sole intention of defrauding suppliers in a short space of time. Typically they will make several small orders, often in conflicting trade sectors, and sell the goods on quickly at lower prices before disappearing with the cash. Buyer Impersonation is when fraudsters impersonate a credit worthy buyer and place orders in their name but either collect the goods or request delivery to a different address. Suppliers then invoice the legitimate company to be told the goods were not ordered or received by them, leaving the supplier out of pocket.
There are some signs that you can look out for that could indicate a fraudulent buyer, which we have summarised below. It’s worth noting however that each point alone doesn’t necessarily point to fraud but several points together should be enough to raise suspicions and warrant further investigation.
Points to watch out for:
- Contact made via mobile phone with no landline number provided and gmail/hotmail email addresses used.
- A website that appears professional but has little functionality.
- The buyer is not particularly interested in price with little or no negotiation.
- An unusually short period between first contact, order and requested delivery.
- The buyer being in a different trade sector to the supplier.
- The buyer being too ready to supply information in support of request for credit such as trade references and accounts.
- The buyer requesting to collect the goods (often in unmarked vehicles) or last minute requests to change the delivery address.
In particular for short firm fraud, here are some additional points to look out for:
- A one-off large order following one or several small orders.
- Registered office being a PO Box or serviced offices.
- If you have access to credit reports from a status agency, recent changes in ownership or a change from dormant to trading.
There are some things that you can do to reduce the likelihood of being defrauded and ensure your customers are genuine:
- Take a contact name, landline number and website address and check them all out.
- Ask yourself whether the grammar and spelling used in any documents supplied are what you would expect from a professional business.
- Google street view the delivery address to validate its authenticity.
- Look up the creation date of email/web domains using whois-search.com (a free service).
- Ask delivery drivers to only deliver to the specified destination and not to change address once in transit, they should also report any suspicions before offloading the goods.
- Request a VAT Number and check its validity using http://ec.europa.eu/taxation_customs/vies/
Additionally, for buyer impersonations, you can do the following:
- Look up alternative phone numbers to the ones given by the buyer and call them asking to speak to the individual to check whether you have been dealing with a genuine employee.
- Beware of urgent or casual orders from an existing customer; insist that they follow usual ordering procedures.
An important point to bear in mind is that generally speaking, fraud is not covered by a trade credit insurance policy. Whilst some insurers will offer cover for short firm fraud, at the time of writing we are not aware of any credit insurers that offer cover for buyer impersonation as part of a credit insurance policy. For these reasons taking the steps above to protect yourself from fraudulent buyers is crucial in ensuring you are not left uninsured and out of pocket. To discuss credit insurance options that include cover for short firm fraud, please contact us.
If you feel that you have been targeted, report it to Action Fraud – the UK’s national fraud reporting centre on 0300 123 2040 or visit www.actionfraud.police.uk