Mandate fraud is where someone tricks you into altering details of a direct debit, standing order or bank transfer mandate by purporting to be an organisation you make regular payments to. For example, a business supplier or a subscription. It is a simple but effective fraud and is therefore commonly used. Huge amounts of money can be easily stolen.
Examples of mandate fraud
Your business may be contacted by someone pretending to be one of your suppliers. They inform you of a change of bank details and that you need to amend their account to reflect this. You therefore amend the details. However, the following month you are contacted by the genuine supplier asking what has happened with your monthly payment. You realise you have been a victim of fraud.
In another situation, your business may be contacted by someone pretending to be from an organisation you have a standing order with. They request you change an order to reflect a change in their banking.
The standing order mandate is changed accordingly but the following month the actual organisation fails to deliver your products or a membership has been cancelled as they did not receive their payment.
Alternatively, your business may receive a letter that appears to be from a company supplying a monthly magazine to you. It provides details of a new bank account and asks you to change the payment details to reflect this.
The direct debit mandate is amended as instructed. The following month your magazine does not arrive. You contact the publisher and are told that because your payment was cancelled you no longer have a subscription for the magazine.
Finally, you may discover your business online bank account has been hacked and monthly payment details have been altered so that money is transferred into a fraudster’s account.
Minimise your risk to mandate fraud
Do not simply rely on faxed information, emails or mobile telephone calls. Take action to verify and corroborate any request to change suppliers’ bank details.
Always verify changes to financial arrangements with the organisation directly, using established contacts you have on file wherever possible.
Maintain records of standing orders and direct debits.
Keep bills and other business documents in a secure place to prevent information falling into the wrong hands.
Check your bank statements carefully for anything suspicious.
Notify your bank immediately if you see any unusual activity on your account.
Genuine cheques from your own company, customers or suppliers can be stolen, altered and presented, or counterfeited and presented.
What you should know
Where possible, only accept cheques from people you know and trust.
Do not release goods until you are sure that the funds are yours.
Find out the average clearing times for cheques at the Cheque and Credit Clearing Company.
Do not accept cheques made out to a higher value than you are expecting.
Be particularly cautious with new customers who place large orders, make overpayments and then request refunds, or request immediate delivery or change their delivery address after the order has been placed. This method is often used in employment opportunity scams or transactions for goods and services sold through classified adverts.
Minimise your risk to cheque fraud
Always use indelible ink-based pens or black or blue ballpoints pens. If you enter details with a printer, make sure approved machines and toners are used. This makes it harder to alter or erase the writing. A list of approved machines is available at the Cheque and Credit Clearing Company.
Ensure any blank spaces on cheques are crossed through with a pen. For example, after the payee name and after the payment amount written in words. If you enter details with a machine, ensure that software adds in any blank spaces with asterisk (*) symbols.
Do not leave large spaces between words. If you use a machine, ensure the software uses ‘zero’ instead of ‘nil’. This can easily be changed fraudulently to ‘nine’.
If you are due to receive a new cheque book and it doesn’t arrive, contact your bank. Consider collecting business cheques from the bank as they are vulnerable to theft from the postal system.
Regularly check your bank statements to keep track of cheque payments.
Avoid using a sole signatory within your business. This allows any discrepancies to be picked up by others.