In Focus Risk


Taking fraud seriously


When it comes to fraud, complacency is the biggest problem: trade credit insurer Atradius provides some salutary advice


Has your business fallen victim to fraud? If not, you are probably not that


concerned and may even be about to gloss over this article. But this may be the most important


warning that your business will get: be vigilant. Businesses succumb to fraudsters each


and every day and often the common denominator is complacency. Nobody thinks they will fall into a


fraudster’s trap; until it happens and by that point it is too late to do anything about it. Your so-called customer will have vanished, alongside any trace of the goods you shipped, leaving you holding a bill which has no prospect of being paid. Fraud is on the rise today and anyone can be a target.


Short-firm fraud There are two main types of fraud which businesses are most at risk from. The first is short-firm fraud, which is when


a fraudulent entity is set up with the sole intention of defrauding suppliers. Often, this occurs when a dormant


business is purchased ‘off the shelf’; the business looks legitimate and there may even be false accounts filed at Companies House to support the illusion and make the firm appear reputable. Short-firm fraud is usually characterised


by several small-value orders being placed in a variety of conflicting trade sectors with goods being sold on quickly at knockdown prices and the fraudster disappearing with the cash.


Impersonation fraud The second main type of fraud is known as impersonation, where a legitimate, creditworthy, long-established business is impersonated. Most supermarkets, fast-food chains, and


franchises have been impersonated in this way. The impersonator approaches businesses under the guise of looking for new suppliers. Delivery details for the subsequent orders then direct the goods to a rogue trading address or, in some cases, the impersonator arranges collection. It is not until the supplier invoices the


legitimate company that it believes has placed the order that it is told that the goods were not ordered by them. The main goods targeted by this type


of fraud tend to be in the food sector, particularly fruit, vegetables, meat, and fish as they can be sold quickly and are then consumed – with all evidence of the product thereby disposed of. However, we are also seeing a rising


trend for impersonation fraud this year in the construction materials and metal industries. Indeed no sector is immune to the risk and the threat of fraud is very much an issue for all.


Telltale signs There are some telltale signs to alert you that you are dealing with a fraudster and some simple techniques you can build into your working practices to detect them. Some of the most essential checks you


should be performing on suppliers only take a few moments.


We are seeing a rising trend for impersonation fraud this year in the construction materials and metal industries. No sector is immune to the risk of fraud


The easiest way to spot a fraudster is a


quick online search. You are looking to compare the incorporation date for the legitimate company with the date the e-mail domain was created and how long it is valid for. If the company is long established and the


domain name is fairly new and only valid for one year, this is a clear red flag and warrants further investigation. You can also check if the domain for the


e-mail address you have been approached from differs to the domain for the company website. Hold any correspondence you have received up to scrutiny; if it is a generic, bland e-mail that is poorly worded, with grammar errors and appears ‘non-professional’, this is another warning sign. The e-mails may also be signed by the


company director as their name is easily sourced – but ask yourself if is it likely that the company director would be the one placing an order with you. We have seen a spate of impersonation


fraud where the fraudster has impersonated a non-trading holding company rather than a trading subsidiary. Look closely at who your order is from; if it is a holding company, be sure to verify that they are the correct trading entity within the group; if not, this should raise alarm bells. Question what is being ordered, the quantity, and for whom, and ask yourself does it all stack up?


38 www.CCRMagazine.com November 2019


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