Watch out, watch out, there's a fraudster about

Businesses must keep their eyes peeled for credit con men. Gary Hicks highlights the warning signs to look for.

More distributors in the IT market seem to be taking out insurance on money owed to them, in the same way they have insurance policies against fire and theft.

This means they are protected against insolvency, liquidation or receivership of a buyer and protracted default when a buyer receives goods but refuses to pay. The insurer pays the claim after a certain period, provided policy conditions are met.

This is a welcome development that safeguards trade. However, new users also need to be alert to the fact that, unfortunately, credit fraud does exist, although sensible precautions help to mitigate its effects.

Frauds range from the obvious, such as a company with tiny assets suddenly wanting huge amounts of credit on products totally unrelated to its core business, to complex schemes involving, for example, non-existent factories overseas, which can baffle even the experts for a while.

Some conmen concentrate on goods they can sell quickly and without fuss. Others specialise in more sophisticated methods, such as gaining the confidence of the supplier with small deals properly concluded, then putting in an urgent order for a large but fraudulent contract.

Another problem is the fraudster stealing company details and using existing lines of credit to have goods delivered to false addresses. Even Companies House is not sacrosanct.

Unscrupulous criminals have been known to call there to change company details, replacing a genuine company address with their own in order to gain credit under false pretences.

New business also needs watching; sales teams, anxious to clinch a deal, sometimes fail to give their credit controllers enough information about a new client.

Even with the safety net of credit insurance and the very careful way credit insurers work together and with others to spot fraud, it is still essential to keep an eye on the credit management chain. Classic signs to look out for are:

• Requests for credit on goods that are incompatible with the applicant's sector;
• Incorrect amounts being invoiced;
• The buyer wanting to collect the goods himself;
• The buyer knowing little about his or her company or the industry;
• Multiple changes of address on an account or delivery schedule;
• No concern about price, which is of purely academic interest to the fraudster.

Gary Hicks is head of public affairs at credit insurer Gerling NCM

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