Corporate-related identity fraud, long and short firm fraud and insolvency fraud
Company impersonations or corporate identity fraud
If someone calls claiming to be from a company that you have a business relationship with and you’re suspicious about the call or the caller’s identity, you can:
ask questions that only you and the genuine company know the answer to, such as a contract number or purchase order number
ask them to email any request
call the genuine company back using your regular contact number and verify the information with the person you normally speak to; your phone line may be kept open by the fraudster, so wait at least five minutes after your call, or use a different phone line
Company hijacks normally involve fraudsters changing the details of company directors and registered offices. To prevent it happening to you, join the Companies House PROOF scheme and register with the web-filing service.
Short firm fraud often follows company hijack.
Long and short firm fraud
This is when criminals hijack or set up an apparently legitimate business to defraud both its suppliers and customers.
They’re happy to deal in any goods or services with a market value, preferably if they’re untraceable and easily disposable, such as electrical goods, toys, wine, spirits and confectionery.
An example of long firm fraud
Your business has a relationship with a company that has a good reputation and credit history. The company places lots of small orders with you, paying promptly. You trust this company as a supplier.
The company changes its activity, though, and makes much larger orders with you. You supply your goods but the company disappears without paying you and sells the goods on.
Examples of short firm fraud
Your company supplies to a new business. If it’s a limited company, it may have filed several sets of false accounts and director appointments at Companies House within a short space of time. It may also provide false trade references to look credit-worthy.
The company has no day-to-day trading activity. It gets goods from your business on credit, which are delivered to third-party addresses. Again, the company disappears without paying you and sells the goods on for cash.
Minimise your risk to long and short firm fraud
Get customers’ full details, including the personal details of those in control.
Get trade references. These need to be from more than one source, and ask companies how long they’ve known the business for.
Confirm their business address and, if you can, contact the company directors to make sure you’re happy with who they say they are.
Complete checks with Companies House along with banking references. Also check with well-known credit reference agencies to see if there have been unusual filing patterns or dramatic increases in credit searches.
If this is too expensive, use open-source checks. Searching on company directors, addresses and trade names can be vital information for you.
If you have time, visit potential customers for proper on-site inspection.
Get landline numbers, not just mobile numbers. Confirm these details and check they answer the phone in the correct company name.
Don’t accept handwritten orders.
For more information and help or to report this and many other types of fraud, go to Action Fraud the UK’s national fraud and cybercrime reporting centre.
Insolvency and bankruptcy fraud
Bankruptcy and insolvency fraud can involve companies fraudulently trading just before being declared insolvent, or it can involve ‘phoenix companies’.
Phoenix companies are set up straight after the insolvency of another company with the same directors, but are not liable to pay for the losses of the previous company because they’re different entities.
Phoenix companies can be perfectly legal. Fraud happens when directors transfer the assets of the failing company below their market value before the insolvency.
By doing this, the directors reduce the funds available to creditors when the original company becomes insolvent. As a result, the creditors are left out of pocket for the goods or services they supplied.
Other associated offences include the re-use of prohibited names, or directors acting while disqualified.
For more information and help or to report this and many other types of fraud, go to Action Fraud, the UK’s national fraud and cybercrime reporting centre.
Read the Little Book of Big Scams Business Edition (below), produced by the Metropolitan Police, to find out more about fraud.