Fake buyer fraud is one of the many threats that hangs over a business. This scam takes on different faces, the better to trick companies into extorting funds or goods. To protect yourself against this, it is better to know exactly what you are dealing with! What exactly is a fake buyer, what forms does this fraud take and how can you effectively protect yourself against it?
Strong increase in the risk of fraud
According to a recent study by Allianz Trade, 57% of companies say they have suffered at least one proven fraud in 2022. The damage is severe: it is greater than 10,000 euros for 1 in 3 companies and greater than 100,000 euros for 10% of companies.
Moreover, 78% of respondents to the Fraud Barometer 2022 believe that the risk of fraud will increase in the coming months.
What is a fake buyer fraud?
Fake buyer fraud takes on different faces, the better to trick companies into extorting funds or goods. A fake buyer is a fraudster impersonating a customer. Fraud aims to divert funds or goods from the victim supplier, by reporting a change of delivery address, or by intercepting the goods before delivery by trickery rather than violence.
According to our survey, fake buyer fraud represented 24% of business fraud last year.
How does fake buyer fraud work?
Different techniques exist for this type of fraud but the most common is the diversion of goods. This method is used to divert any type of goods.
The company responds to an order from whom it thinks is one of its existing or potential customers. The company receives a call or a fraudulent email, shortly before the scheduled delivery of the goods, indicating a last-minute change of address for delivery. The goods are delivered to the fraudster who has impersonated the customer’s identity in every detail. The company discovers the fraud when the due invoice is not paid.
Another technique is the fake carrier fraud. The fraudster impersonates a known carrier. The fake carrier picks up the goods for a customer and makes the goods disappear. The company discovers the fraud when the real customer asks the delivery of the goods.
How to prevent fake buyer fraud?
To prevent your company from fake buyer fraud, you can take some preventive measures:
Carefully compare the client's emails with previous exchanges.
Consider every change request as questionable (company details, bank details or delivery address).
Carefully compare the client's emails with previous exchanges.
Check of the delivery address on instantstreetview.com.
Ask your carrier to confirm beforehand the plate of the truck that will pick up the goods.
In case of any doubt, call the customer's purchasing department to verify the existence of their order and the delivery address.
Unfortunately, fraudsters are being more creative and constantly improvising new schemes, according to events and context. Preventive measures decrease the risk of fraud but you will never be 100% safe from fraud.
Protect your company against fraud
Whether the fraud is committed either internally or externally from your company, the financial losses will generally have a major impact on the company. With our fraud insurance, you will protect your company against financial losses incurred by internal and external fraud.
You will probably engage additional costs to limit damages such as legal process costs. The good news is that in addition to financial losses, these costs are also included in our fraud insurance.
Do you want more information about our fraud insurance? Contact our team. Our experts will be glad to help you.
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