Beware Imposter Companies

8th February 2024

As reported on the BBC today  there is an emerging identity theft scam developing.  Fraudsters are setting up companies to clone famous names and then obtain bank accounts, loans and credit from suppliers.

Companies House has begun an investigation in the last 6 weeks, as more than 750 fake firms have been registered, often with misspelled names.

As a supplier, it is easy to be caught out by a scammer seeking to buy goods and services on credit, trading on the good name of others. Small businesses must remain vigilant to safeguard their operations particularly from new customers.

The BBC article highlights the case of a UK-based supplier who fell victim to a sophisticated scam, resulting in substantial financial losses. Fraudsters set up a company in the name of  a famous chef. They even used his real address. The modus operandi of these fraudsters is as cunning as it is deceitful. Through a combination of social engineering tactics and counterfeit documentation, they masquerade as legitimate buyers, luring suppliers into false transactions. They set up companies at Companies House using similar or misspelled names of legitimate businesses. In the digital realm where trust is often built on virtual interactions, distinguishing between genuine inquiries and fraudulent attempts can be an arduous task.

You may assume that a company that has been registered at Companies House as gone through vigorous checks. But really Companies House does nothing more than rubber stamp applications without any investigation or checks.

For suppliers, the repercussions of falling prey to such scams extend far beyond monetary losses. The erosion of trust, damage to reputation, and potential legal ramifications can have far-reaching consequences for businesses, jeopardizing their long-term viability. Therefore, it is imperative for suppliers to adopt a proactive approach in mitigating the risks posed by scammers.

So, what steps can suppliers take to protect themselves from falling victim to these fraudulent schemes?

1. Verification Procedures: Implement robust verification procedures to authenticate the identity of potential buyers. Requesting additional documentation, conducting background checks, and verifying the legitimacy of companies can help weed out fraudulent actors. Don’t just rely on the information they provide. Independently check that the website address, email, phone number and physical address match the legitimate address, although fraudsters may even use the physical address. Watch out for newly registered companies.
2. Vigilance and Due Diligence: Exercise caution when engaging with unfamiliar or new buyers, especially those who pressure for swift transactions or offer deals that seem too good to be true. Conduct thorough research on prospective clients, scrutinizing their business profiles, online presence, and reputation within the industry.
3. Communication Protocols: Establish clear communication protocols within your organization to ensure that all staff members are aware of the risks associated with fraudulent inquiries. Provide training on identifying red flags and encourage employees to escalate any suspicions promptly.
4. Secure Payment Channels: Utilize secure payment channels and implement stringent verification processes for financial transactions. Be wary of requests for unusual payment methods or deviations from standard procedures, as these could be indicators of fraudulent activity.
5. Collaboration and Information Sharing: Foster collaboration within the industry by sharing information and insights about known scams and fraudulent tactics. Participating in forums, industry groups, and networking events can facilitate knowledge exchange and help raise awareness about emerging threats. If they are targeting you, they are likely targeting similar local businesses. Like any predator, the scammer works best against those cut off from the herd.
6. Seek Professional Assistance: In cases where suspicions arise or transactions seem dubious, seek guidance from legal and financial professionals with expertise in fraud prevention. Their insights and advice can provide valuable support in navigating complex situations and mitigating potential risks.

By adopting a proactive stance and implementing robust safeguards, suppliers can fortify their defences against scammers and minimize the likelihood of falling victim to fraudulent schemes. In an era defined by digital interconnectedness and evolving threats, vigilance and diligence are paramount. Let this serve as a reminder to all suppliers: stay alert, stay informed, and stay protected. Your business’s resilience depends on it.

If you come across any suspicious cases, let CPA know at info@cpa.co.uk

James Salmon

Operations Director