Heard the one about the reseller who was defrauded three times in a Knowing how they operate will help resellers minimise the risks. week by the same gang? Or the reseller who took a building society cheque for #30,000 and discovered too late it had originally been made out for #3? Or the three resellers who were relieved of more than #100,000 worth of laptops by a bogus building firm?
Unfortunately, all these stories are true. Fraud involving PCs and accessories is on the increase. This is partly due to their portability and high value, and partly to a cut-throat market which makes some salespeople willing to take a chance on orders, even when they sound too good to be true.
Some mail-order resellers reputedly write off several per cent of their turnover to fraudsters as an unavoidable expense. PC fraud is big business.
Network installation company Banbury Computers was the victim of fraud three times in a week just before Christmas 1996 by orders for processor chips from a London-based gang using a series of mobile phone numbers.
The losses nearly bankrupted the company.
But when the thieves came back for more in the new year, Banbury organised three further deliveries - with a police squad car on hand each time.
Seven people were arrested and one gang member was charged with fencing stolen goods, which he had stored at his flat. 'The police found wads of money stuffed in every drawer,' says Banbury managing director Peter Donovan.
Donovan has been contacted by at least 15 other dealers who have been defrauded in similar fashion. Most resellers are contacted by potential fraudsters several times a year. One reputedly made 100 calls a day, trying to order between #4,000 and #6,000 of chips each time. Another was warned off by police, but brazenly called the dealer back within half an hour to chase his fraudulent order.
The London area is so familiar with PC fraud that the capital's crooks are looking further afield. 'Most credit card fraud takes place within the M25,' says detective sergeant Ian Towell of Merseyside Police. 'But fraudsters realise that people are getting wise to them and are moving out of town.'
Some of the gangs are said to have come to the UK from West Africa, in particular Nigeria, under false names to set up elaborate frauds. Stolen or forged credit cards are increasingly popular with fraudsters. Many stolen cards are foreign, especially Canadian, and such theft is not always notified to international authorisation agencies. Sharp-eyed sales staff should look out for unfamiliar numbers.
It is important to take extra care with CNP (customer-not-present) telephone, fax and internet sales. Even after a credit card company has authorised the transaction, it is not obliged to pay up if there turns out to be a problem.
'The credit card company didn't even tell us it was an American card, or that the name didn't match the one we were given,' says Donovan of the fraud directed against his company. Because the transaction was made over the telephone, the company never saw the card and had no way of knowing that the name it had been given by the fraudster and the one on the card were different.
Because of the risks, an increasing number of resellers no longer take credit cards. But there is also the danger of dud cheques. Essex reseller RDC took a building society cheque last year for #30,000 of Ram chips.
'When we banked it, we found the cheque had originally been made out to P&O for #3, but the fraudsters had made such a good job of altering it that we couldn't tell,' says RDC MD Rod Best. 'Now if we get a building society cheque or banker's draft, we ring the issuing branch to check it out.'
2U Computers of Saffron Walden took a building society cheque for #2,850 for two desktop PCs. The customer placed the order by mobile phone and arranged to pick the PCs up the next day at 4.30pm. But he arrived at 6pm, after the banks had closed, so it was not until the next day that 2U's proprietor Keith Higgs could take the cheque to his bank.
2U turned out to have been the 46th company in nine years to be duped by copies of the same stolen cheque. About half the fraudulent payments were for PCs. The others were for a mixture of goods, including a horse box - the fraudsters had been insistent about its colour scheme, indicating they were stealing to order.
'It taught me that a building society cheque is not as safe as I thought,' says Higgs. 'I also made the mistake of not getting the customer's phone number - he said it was a new business so he didn't have one. We're more careful now.'
Another favourite fraudster's trick is to pay a dud cheque into the reseller's bank account, completing the payment slip as though it were a cash payment rather than a cheque. If the bank does not notice, the incorrect stub, detailing a cash payment and stamped by the bank, is used as proof that the cash is already in the account. The cheque does not bounce until after the goods have been delivered.
This nearly happened to reseller Computer Modelling in High Wycombe.
Initially, the bank confirmed that cash had been paid in, but called back minutes later to say it had made a mistake. The fraudster, calling himself Brandon Computer Services, wanted 10 Pentium II/300 processors, but several things about his order did not seem right. He accepted the price without haggling and refused to give a phone number.
'He was too eager,' says Computer Modelling managing director David Lovelock.
'If I had been the customer, I'd have asked more questions. The letter he faxed was tacky, the letterhead didn't look genuine, and he was phoning from central London - why was he calling a dealer in High Wycombe?'
The fraudster demanded next-day delivery and was anxious to know which courier firm would be used, presumably so he could give a fake address, then claim he had been out and collect the chips from the courier firm. Nor could Lovelock find any reference to Brandon Computer Services at Companies House, in Dun & Bradstreet, or on the internet.
Some fraudsters take a short lease on an office or flat, or give the address of an office building and wait in reception for the courier. The most enterprising can even set up a bogus business, like the gang which took over a bankrupt building firm in London's Park Royal and obtained more than #100,000 of laptop PCs.
The Metropolitan Police Fraud Squad says it has received allegations from more than 40 companies about stolen computer equipment, furniture and building plant worth #1 million. Crooks paid one reseller enough cash for their first order to take them over its credit worthiness threshold.
But the next four orders were never paid for and the reseller lost #25,000. Transam Microsystems, another reseller, refused credit to builders when they tried to place a large order, so the fraudsters went through finance companies.
'We weren't prepared to take the credit risk,' says Transam managing director Nigel Stride. But the finance companies argued that, because the customer had not confirmed receipt of the goods, they were not obliged to pay up.
One finance company, Hewlett Packard Finance, has paid the #10,000, but Transam is still negotiating with the other, Lombard Business Equipment Leasing.
The fraud problem is not going to go away any time soon, and resellers say that some police forces and financial institutions appear to be too short-staffed to be able to stop it. Part of the solution is to publicise frauds so other resellers are not caught in the same trap.
But the reseller's main weapon is to be vigilant.
'They rely on the greed of the salesman to close the sale,' says Stride.
'My instructions to staff are to risk losing the sale rather than risk losing the money.'
Peter Donovan is compiling a list of resellers that have been approached by conmen. Contact PC Dealer if you have any relevant information.
Spot the signals
Many frauds display similar symptoms. Taken in isolation, the points listed below could also apply to bona fide customers, but each could be another piece in the jigsaw. So be wary of potential customers who:
- conduct all their business by mobile phone
- give a fixed phone number which is never answered
- are not interested in price, or other terms and conditions
- seem too eager to trust you
- place orders just below the limit for credit checks, or request that their order be split to avoid authorisation
- pay with foreign credit cards or with someone else's card
- demand very quick delivery, and keep chasing you for progress reports
- threaten to go to a competitor if you cannot deliver fast enough
- can't remember details when they chase up the order order only small and - easily saleable items - portable PCs, processor chips, disk drives, PDAs, mobile phones - which can be shipped quickly from stock
- order multiple units of an item
- appear to be a small company placing a large order
- have letterhead that looks homemade or have words like Corporation, Worldwide or Plc in the name
- are unlimited or startup companies with no financial or credit references
- claim to be a reseller or other computer company are located far away, especially in greater London
- want delivery to a private address, a serviced office, a hotel or guest house
- want delivery to a West African address
- want delivery to an address other than that of the owner of the credit card
- want to collect or take delivery in the evening or at the weekend when banks are shut
- change delivery details at short notice
- want to know which courier is being used so they can pretend they were out and go to the courier firm to collect
Long though it is, this is not an exhaustive list. If you are at all suspicious, contact the police and your bank or your credit card acquirer without delay. Better still, don't honour the order until you've investigated your suspicion.
Train your sales staff to spot the signs and not to be too greedy. If an order sounds too good to be true, it probably is.
Make sure your accounts people are not too busy to make necessary checks.
Consider employing extra staff if necessary.
Recruit staff carefully to avoid insider fraud.
Warn delivery drivers and couriers to be suspicious. They should not deliver to vacant or suspect addresses. They should hand over goods to someone inside the building, not hanging around outside, and to a named individual who signs for them. If it is a credit card sale by phone or fax, consider getting the driver to check the card.
Insist on a written order on letter headed paper, with full payment details and signature.
Check out the customer's company, using company searches and credit reference agencies; or ask to see utility bills or a bank statement. Check on the electoral register or with Directory Enquiries that the delivery address of any private customer matches the name on the cheque or credit card.
If a customer claims to have paid cash into your account, check with your bank.
If a customer pays by cheque, contact the issuing bank to verify that the account is genuine, the cheque is not stolen and the account has sufficient funds. Then wait for the cheque to clear into your account (it may appear on your statement before it clears). Don't call a bank number provided by the customer - it may be a stooge pretending to be the bank.
Be cautious when dealing with credit card sales and read your acquirer's terms and conditions carefully. The Association for Payment Clearing Services (APACS) publishes guidelines on fraud prevention and these are available from banks. Remember that customer-not-present sales (by phone, fax or internet) are at the reseller's own risk, even if authorised by the card company.
Don't be complacent, even if you haven't been approached by anyone suspicious for a while.
If you get stung, or are suspicious about somebody, tell as many people as possible - police, banks, trade associations, other resellers, the press.
These are only guidelines. Take professional advice if in doubt.
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