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Policy & Compliance


BIFAlink Stay alert to beat short firm fraud


BIFA is grateful to James Campbell of the European Freight Trades Association (EFTA) for the following article. EFTA is an Associate Member of BIFA and many BIFA Members rely on credit control tips, fraud alerts and scam information from it.


In recent months EFTA has repeatedly warned its members to be on the lookout for ‘short firm fraud’ – which appears to be on the increase – and not to become overly reliant on credit limits and recommendations given by credit reference agencies (CRAs).


Short firm fraud is when a business tries to establish a glowing credit reference by filing bogus accounts at Companies House, which the fraudsters then use to obtain goods and services on credit that are delivered to third-party addresses, often on multi-occupancy trading estates. The goods are sold for cash and the criminals then disappear. Goods that are preferred, because they are not easily traceable and can be turned over quickly, are electrical goods, computers, toys, toiletries, wines, spirits, fancy goods and confectionery.


No warnings


Companies House cannot verify or validate the documentation and information it receives and makes available. Also, at present, it does not publish any adequate warning to advise this. EFTA has repeatedly demonstrated to its members how CRAs unwittingly assist short firm fraud by simply accepting without question accounts that are filed at Companies House and then basing their recommendations (credit ratings and limits) on this information, which could well be entirely bogus. Working examples of the weakness in the system have been provided to EFTA members who are encouraged to actually examine


January 2019


accounts (which can be obtained for free from Companies House Beta) to see whether they are credible given the trading period or ‘too good to be true’. EFTA recognises the need for businesses to


have CRA facilities but cautions its members not to blindly believe everything that such agencies report.


Other steps that can be taken to protect against short firm fraud should include: • Ask for trade references and then check the authenticity of the referees. Sometimes criminals form companies to fraudulently provide references for each other.


• Follow up trade references. • Visit potential new customers for a thorough on-site inspection of the business premises.


• Get a landline number from the applicant company and then ‘Google’ it to see what it might reveal.


• Have a careful look at the website of the applicant company (if one exists) to see whether the information it contains roughly matches any financial information/references you have gleaned about it.


• Check publicly available databases on the Insolvency Service and Companies House websites to see whether the individuals are bankrupt, or otherwise disqualified from acting as directors of a limited company.


• Check who owns the domain names of any website the business uses.


• Be wary if the only means of contacting a business is through webmail-based email


addresses and mobile telephone numbers.


• For less-than-stellar potential new customers, request payment upfront on first shipments via bank transfer, not card or cheque.


• Ensure that goods are delivered to identifiable individuals and addresses, and do not allow goods to be cross-loaded to unidentifiable vehicles waiting at the delivery location.


• If possible, have more than one person look at the applicant company before reaching a decision about extending credit. Two heads are better than one.


EFTA membership EFTA Membership is low cost (less than £1 per day and BIFA Members get a 25% first year discount). The Association provides unique and vital up-to-date information that is missing from all other credit reporting options to assist its members reduce the risk of bad debt, slow payers and fraudsters. Its proven methods and successes are built on a positive and pro-active membership. EFTA offers a no-obligation meeting at the


premises of interested parties to discuss membership and what the Association provides. EFTA is actively lobbying Companies House to


introduce a suitable, clear warning that it cannot verify or validate the information it makes available in order to pressurise CRAs to include a similar warning in their reports.


For further information about EFTA, visit the website www.eftaweb.com or contact James Campbell on admin@eftaweb.com


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