Category Fraud/Crime

Business Fraud – Buyers Beware

20 August 2009 Coface

Coface South Africa has on many occasions warned its clients and buyers about the growing dangers of fraud in South Africa. Once again it says it is raising the flag on white collar crime because it is on the increase.

“The three major scams we are experiencing across industries are related to company identity fraud. The first type of company identity fraud we have witnessed relates to false buyers requesting delivery of goods from clients, changing the delivery address,” says Coface operations manager Jacqui Jooste.

Change of Delivery Address
The fraudsters call the supplier and change the delivery details for goods to be delivered. The supplier then delivers the goods to the new address, but when the supplier tries to collect payment from the buyer, the buyer has no record of receiving the goods.

“To avoid this type of fraud, it is important that suppliers set up additional checks and balances in the case of a buyer requesting changes to their account. This includes delivery details, bank account details or contact details,” says Jooste.

Opening an Account Under a False but Well-Known Company
The second type of company identity fraud targets organisations by creating a fraudulent duplicate company. Fraudsters misrepresent themselves as representing a well-known company. The credit application looks authentic and the supplier thinks they are opening up an account for a well known company. Goods are then delivered and once the supplier attempts to collect the outstanding amount from the well-known company, it is established that the transaction was fraudulent.

The company name is well-known and valid, but the people running the business were fraudulent, posing as representatives of that company.

Changing of Banking Details
The third type of fraud Coface South Africa has seen recently is directed at the buyer. In this instance, the fraudsters call and send a letter of notification to the buyer changing the bank account details of one of their legitimate suppliers. The buyer is requested to make the outstanding payment into this new bank account on the deliveries they have received.

“The documents Coface South Africa have seen are very detailed and look almost identical to the supplier’s official stationary. In addition to the design of the documents, the fraudsters have the correct signature and stamps used by the actual supplier,” says Jooste.

As a result, the buyer dutifully fulfills their payment of outstanding moneys into this new account. The fraud is often only picked up when the buyer’s account is overdue with the supplier. The buyer believes they have already ‘paid’ the money into the correct account, but in fact the supplier has not received payment.

Jooste says to avoid being defrauded in this manner, it is important to have procedures in place regarding changes in supplier details. This could include phoning the supplier’s finance department and calling the bank where the new account is held.

“What is interesting about these scams is that the fraudsters seem to target well-known brands. This could be because these companies’ documentation is easier to get hold of, and therefore easier to alter. It could also be that the brand reputation of the companies has created a sense of trust from the suppliers or buyers, and therefore less questions are asked when changes are made,” says Jooste.

“Regardless of the reason, we encourage companies and their buyers to be on the alert if there are any changes in company details,” says Jooste.

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