Businesses urged to take steps to guard against commercial fraud
To coincide with National Identity Fraud Prevention month, which started earlier this week, commercial credit reference agency Graydon UK is urging UK businesses to remains alert to the threat posed by corporate fraudsters and advising them to take preventative measures to avoid becoming a victim of commercial fraud.
Fraudsters tend to use genuine company details for dishonest purposes. Signatures are forged in order to have goods delivered to an address which in no way is associated with the original bona fide company whose identity has been stolen. Fraudsters also file false documents such as fictitious balance sheets at Companies House in order to generate good credit ratings with the information agencies. On top of these filings, fraudsters are filing false Director Appointments and Registered Office changes in order to facilitate identity theft fraud.
By obtaining a credit report for customers and suppliers, businesses are able to identify potential corporate fraud. Applying computationally intensive techniques such as pattern recognition, data mining and machine learning algorithms, unusual traits and suspect patterns can be identified. Credit reference agencies such as Graydon use proprietary software that interrogates the entire UK business population and identifies records which display “unusual data characteristics”.
Alex Schwendtner, Managing Director, Graydon UK, commented: “There is often a misconception that fraudsters only target individuals. However, corporate fraud also constitutes a genuine threat to businesses, especially SMEs, who are seen to be more vulnerable and easier targets as they often do not have a dedicated credit management function.
“Commercial fraud occurs often when orders for goods on credit are not properly vetted by suppliers. However, fraud can only be perpetrated when existing credit control procedures at the supplier’s end are insufficient. The good news for businesses, no matter the size, is that procedures can be put in place to tackle this problem and tips can be taken on board to protect your company’s best interests and profitability.”
Graydon UK recommends that businesses should take the following tips on board to safeguard against the threat of commercial fraud:
• Never set up a client account until the application for trading has been fully checked and processed.
• Always verify clients’ trading and registered office addresses.
• Be wary of mobile phone numbers and non business email addresses such as Hotmail or Yahoo.
• Check whether your customers have a website when establishing their identity.
• Most companies will support their order by supplying a purchase order from their accounts department - make sure that you obtain a purchase order number before supplying any products or services.
• When dealing with non-incorporated businesses, always request original copies of utility bills addressed to the delivery address that you have been supplied with.
• Double check all delivery addresses, keeping a close eye on what sounds like residential addresses.
• Check whether clients are VAT registered by calling the VAT Office for confirmation, or simply verify VAT registration via the European Commission’s VAT validation website.
It is also extremely important to flag certain events and details that seem out of the ordinary. Here are some examples of incidents which should alert businesses to the possibility of fraudulent activity taking place:
• Is a sudden change of delivery address provided to you by the client?
• Is there a last minute call to collect the goods rather than have them dispatched to the quoted delivery address?
• Is the delivery address given by the client shown on the credit report you obtained from your agency?
• Are the telephone numbers of the business you are dealing with fixed line or non geographic such as 0800 numbers?
• Have you received an order on the last afternoon of the month? Fraudsters, like credit managers, understand the pressure from the Sales Department!
• Look out for unusually large orders placed at the start of a new month, where a fraudster will anticipate that they have the longest timeframe before you chase for payment.
• Have you received a large first time order on a credit card? If so, be wary.
Alex Schwendtner, Managing Director, Graydon UK, adds: “Always ask the question ‘Why?’ Many SMEs have personal relationships with their clients and therefore expect them to pay their bills on time just because they have always done so in the past. However, customers’ circumstances can change. Such a complacent stance can leave businesses vulnerable and so undertaking regular credit checks will ensure that businesses are alert to any changes in behaviour, safeguarding against potential fraudulent behaviour."