ARE BUSINESSES TOO COMPLACENT
Equifax warns that even basic checks aren't being done, as DTI and Police announce three-county crackdown on alleged company fraud
On 10th January 2007 the Department of Trade and Industry announced a three-county crackdown on alleged company fraud, targeting 30 companies alleged to have defrauded legitimate businesses of over £10 million. Operation Barber, the biggest operation of its kind, centres on a series of alleged commercial frauds in which it is alleged that companies established lines of credit to buy easily disposable goods and then went into liquidation, having sold the goods without paying the creditors.
Leading business information expert, Equifax, welcomes the actions of Operation Barber but warns that this type of fraud can hit almost any business if the necessary checks aren't put in place. And a recent survey* by Equifax revealed that three quarters of business owners fail to carry out even the simplest of credit checks on potential customers. The picture is even worse when it comes to dealing with potential suppliers, with 75% admitting they don't run any form of background checks.
Neil Munroe, External Affairs Director of Equifax, admitted he wasn't surprised by the findings. "I am disappointed - but not surprised - by these findings. Far too many businesses are failing to take the issue of company fraud seriously despite all the warnings. The risks are very real but if a business can't make the effort to check potential customers or suppliers, they are leaving themselves wide open to what could amount to catastrophic losses."
Top 5 Types of Fraud Identified in Survey
- Customer used fake details to obtain credit and didn't pay for goods
- Bank account accessed and abused
- Company details used to purchase goods
- Cheque Fraud - cheque book intercepted and used
- Internal fraud
There are some simple steps that can be taken to help prevent company fraud - starting with credit checking new customers and suppliers. Ongoing monitoring is also recommended by Equifax as crucial to identify any changes in the circumstances of customers and suppliers, including changes in the company's Directors, in its registered office or in its financial situation. "Operation Barber is going to the heart of the problem, but unfortunately many companies have already suffered at the hands of these fraudsters", concluded Neil Munroe. "Prevention is most definitely better than cure and whilst fraudsters are clever, initial basic checks and ongoing monitoring will at least reduce the risk to businesses."
The Equifax 12-point Checklist to reduce the risk of Corporate Fraud
- Identify business partners and directors
- Confirm fax and telepone numbers
- Never accept hand written order forms or faxes
- Confirm the trading address of customers and suppliers
- Ask for original headed company paper
- Don't assume information provided is correct - always double check and follow up references
- Are you sure they are who they say they are?
- Check that the telephone area code is relevant to where the business claims to be trading from
- Can they provide trade or bank references?
- Are all references truly independent?
- Check for any connections to previous companies with similar or identical names
- Did they answer your call with a business name?
For further comment from Neil Munroe on Corporate Fraud please contact Claire Foster, Kate Clements or Wendy Harrison on 020 8977 9132 Claire@harrisonsadler.com
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* Survey of 2,000 Equifax customers in September 2006
