Written by Alice Payne
Posted on 27/01/2015

Do not fall victim to Corporate Identity Fraud

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Corporate fraud is one of the world’s biggest growth industries. Its broad scope and evolutionary nature means businesses must take a proactive stance in protecting their assets and identity.

What’s the risk of corporate fraud?

Around 17% of UK businesses have been victims of fraud. The impact can be wide-ranging: from financial loss to companies and clients; to brand and reputation damage; and in some cases, business failure. Understanding some of the different types of corporate fraud can help you take an informed approach to safeguarding your business.

Corporate identity hi-jacking

As the Home Office explains, corporate identity fraud is “when a false corporate identity or another company’s identity details are used to support unlawful activity”. In practice, fraudsters may use your organisation’s good payment record and reputation to procure goods and services from suppliers. They could do this by submitting false documents to Companies House, changing the registered address and adding details of fake directors. Once achieved, they can then make false credit applications.

Alternatively, they may use your business identity to extract personal information from your customers or suppliers with the aim of defrauding them.

To protect your business, check your registered details regularly to make sure they haven’t been changed. You can also use a reputable credit reference company to undertake regular checks on your customers and suppliers, looking out for unexpected changes in their available information.

Falsified credit applications

Misleading companies into extending a line of credit is a very common type of fraud. A higher proportion of these scams occur towards a company’s year-end, when fraudsters know that key finance staff may be distracted by their increased workload.

To protect your company, never be rushed into making a decision about extending credit. Conduct due diligence on the client – you can check their credentials with their auditors. And ensure to meet face-to-face at their premises. If they do not agree to this, don’t extend credit to them. Signs for concern may be if they use a PO rather than a physical address, or if they don’t want to meet at their offices or if they appear to have recently moved into a leased address.

Before extending credit, make sure to establish how long they’ve been in business, how long they’ve been at their present location, their credit rating with other vendors and credit reference agencies, and personal information on their directors or owners.

Website cloning

Website cloning is when fraudsters replicate your company website, creating a fully functional site – with a few key differences. This site can then redirect the financial details that customers enter, or change your company’s contact details – redirecting customers to fraudsters.

To guard against this, search online for your company on a regular basis to ensure you know your online presence. And when doing business with other companies, always look for the padlock symbol on their website and ensure the web address starts https://.

False invoicing

Fraudsters may falsify invoices, purporting to be from established suppliers that you work with. Be on the lookout for inflated charges or duplicate invoices. When in doubt, always call the supplier, and ensure your accounts employees understand the importance of never ignoring credit or payment terms.

First steps – conducting basic checks

Basic due diligence can help protect your business from the offset. Before you start to vet potential and existing clients more thoroughly, this basic checklist can highlight any obvious areas of concern. So make sure you:

  • Know the identity of your customer (meeting face-to-face is always best)
  • Check the company registration number (the one UK data item that can never change)
  • Validate all delivery addresses
  • Check the company auditors are registered with a recognised professional audit body
  • Run a domain name check
  • Check for valid VAT numbers.

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