Fraud Alert - Company Fraud

Current Trends

The emergence of the Internet acts in two key ways to increase long firm fraud and identity fraud. Firstly as a simple source of identification of potential suppliers and secondly as a faceless interface.

As a result this has caused a major increase in identity fraud and will continue to do so. Most perpetrators will identify that they are only required to provide details currently available in the public domain on companies whose identity they are trying to assume. They change the point of contact by telephone and e-mail and request delivery to an alternative address, which is not uncommon for many transactions.

This method removes direct contact and therefore the traditional benefits of customer contact (masking the experience of an individual who sounds unprofessional, foreign or who does not understand the product and price relationships). This alleviates setting off alarm bells that a fraud could be in the process of being perpetrated. This method also facilitates a much quicker and wider net to be cast by the potential fraudster. In the past they may have been limited by the amount of traditional marketing and / or knowledge of companies supplying particular products, whereas they can now identify significantly more opportunities and hit them with requests within a short time interval, which again protects them against detection.

Due to constraints on all businesses to deliver quickly and move their business forward, the volume of telephone sales order transactions has increased dramatically over the last 10 years. This still remains the main route utilised when perpetrating fraud with traditional fax documentation, etc. being utilised. This route has also been utilised on occasion for fraudsters to attempt to place orders on existing customer accounts stating that they do not have their account number to hand. This removes most barriers completely to supply.

The traditional long firm is still a regular occurrence but as a result of the above, is more time consuming to establish using traditionally recognised methods.

As a result many have now looked at using the system of filing documents at Companies House and influencing credit rating agencies opinions accordingly. This process may take a number weeks to mature so the approach tends to be almost professional in its execution.

This is carried out by notifying changes in directors, company secretaries or registered addresses to Companies House without the knowledge of the real company concerned. The fraudsters will then trade on those changes, the real company unaware this is happening.

The Metropolitan Police are currently working very closely with Companies House to deal with this problem.

Commodities at Risk

In respect of monies/commodities, there is certainly a major focus on all retail electrical goods. These include high value a/v electrical, including plasma screen, computer products, components and peripherals. This also extends to printer cartridges, mobile phones, furniture and high-class merchandise including clothing, branded accessories and sports goods. It even extends to elements in construction.

In a number of cases it is fairly apparent that the fraud has been executed with a specific shopping list in mind and therefore probably existing outlets for products. These tend to be quite complex and professional in set up and utilise the maximum time scale to gain most benefit. However, there still remain a large volume of small speculators who are looking for a one good hit on products they can shift quickly for cash. These can be measured by the quantity of product an operation can handle.

Impact of Accommodation Addresses

These provide a legitimate appearing front and protect the fraud for the maximum period even if they have not visited the office for some weeks. They provide an effective mask and there is very little that can be done to validate the business in question until events have spiralled.

It is felt that the geographic boundaries and lack of centralisation of information does not allow the true scale of these offences to be identified, either quickly enough or at all. Suppliers based around the country report the incidences to their local police. Therefore the overall exposure, which can run into very significant numbers, is not identified at an early enough stage to allow action to be taken. All fraudsters use this to their advantage, safe in the knowledge that the true scale of their attempt will not come to light for a significant period, providing them with enough time to maximise their supply.

Victim Profile

The victims in these cases are the companies that supply the commodities and therefore suffer the loss and companies who are impersonated. The actual cost of a loss varies and no overall figure is readily available from either police databases or private sector bodies with an interest in preventing this type of offending.

The companies affected tend not to be the multi nationals or large companies that are well known in the public domain, but more so mid tier businesses.

Suspect Profile

The suspects are extremely well organised with a knowledge of companies. A far more sophisticated approach will involve supporting documentation and references from accountants and solicitors to facilitate the fraud.

Multiple addresses will be used, especially for the delivery of goods. This makes the recovery of goods or the intervention of law enforcement all the more difficult.

A recent police operation re-emphasises these facts. In this particular case a company dealing with sportswear was taken over by fraudsters when the legitimate directors retired.

The fraudsters then started to deal in a variety of other commodities that included prestige cars, horse manure and electrical goods. Different drop addresses through out London and Home Counties were used and it was evident the fraudsters had ready outlets for the goods.

It became clear that where the initial focus of the operation was on an individual who was a traditional fraudster, there were in fact other organised crime groups behind the operation. The main player in this particular case was in fact linked to and concerned in people smuggling amongst other criminality.