In today’s increasingly connected world, Credit fraud is a rising problem worldwide that has accelerated with digitalization and remote working.

Whichever method fraudsters can adopt, there are common red flags that should alert a company’s credit department to a problem.

1.     Contact details

If a potential client’s email address bears a generic email handle rather than a company name, it should set off alarm bells. However, these days, fraudsters take it one-step further, by creating perfectly professional email addresses. For example, if a real company’s email handle is @chemicalproducer.co.za, the fraudster might use @chemicalproducer.net.

Fraudsters usurp the names of well-known retail distributors, or even transport companies, to place orders: the goods are sent, but the invoice is never paid.

How to prevent such Fraud?

Check available business information on the Internet and social media, including:

• The company website with the contact email addresses if they match the details of your customer/ buyer 
• Names of directors and/or persons representing a company. 
• The business /delivery address through Google Maps to determine if the delivery premises look legitimate 
• Call the buyer in case there is a sudden change in delivery location especially to a different country to verify the change 
• The company logo on the website and compare to the one mentioned on the order 
• You may also request from your customer identification documents as part of their KYC procedure to verify the information received initially from the contact person. 

2.    Financials and other documents

Financial documents are a very good place to look if suspicions rise based on a client’s contact details. 

Many inconsistencies can be found: 

• Audited financials are available shortly after year-end (realistically, an audit takes at least three months). 
• Audited pages differ in format or color from the rest of the company’s financials.  
• The auditors named on the financials differ from those generally used by genuine companies, or their signatures look copy/pasted. In this case, contact the auditors to confirm they signed the financials.  
• Figures are in international, rather than local, currency (unless you are trading in one of the few countries where accounting laws authorize the use of international currency). 
•  Financial figures from first-time clients are overly positive.  
• Documents are covered in an exaggerated number of official-looking stamps. 

How to prevent such Fraud? 
 

• Request a recent extract from the official trade register. This applies to all new clients, of course, but it is also advisable to request and check a new extract periodically for existing clients. 
• Request a copy of the ID of the director authorized by the register. Clients who are in good faith will have no problem providing such proof

3.     Sector    

Fraud can happen across many industries, but some are more prone to it than others are. If your company is selling tangible goods that can be easily sold on the black market—such as construction materials, chemicals or tires— it is wise not to release any orders without doing the necessary credit checks.

4.     Urgency

If a new client places an order and stresses the urgency, your credit department should make sure all the points above check out. Urgency is a common tactic to all types of fraud: the aim behind it is to prevent thorough checks from being carried out.

Finally, business fraud may be on the rise, but we, at Allianz Trade in Middle East, make sure our clients are armed with this knowledge, so they can stop a fraud attempt before it is too late.