Resellers are being warned that a type of fraudulent activity, known as company hijacking, is on the increase.
Company hijacking involves criminals building up a company's reputation, lines of credit and trust with suppliers before suddenly disappearing with the money or goods, leaving suppliers and customers out of pocket.
Alternatively, fraudsters take over an already established company name without suppliers and customers even knowing, before running it into the ground. Criminals are able to change the details of a firm at Companies House with a simple phone call.
David Alexander, fraud investigation partner at accountancy firm KPMG, said cases such as this, known as 'long firm fraud', are on the increase.
"It is another type of company identity fraud, and I know several clients that have fallen foul of this type of crime. It is very difficult to detect, but channel players should watch out for firms that suddenly increase their credit limit or buy different products to their normal orders."
Eddie Pacey, director of credit at distributor Bell Microproducts Europe, told CRN that other signs to watch out for are if a company has posted a consistent set of financial results, but the following year turnover suddenly increases dramatically.
"This is happening on a more regular basis, particularly in two areas of the channel: sub-distribution and brokerage," he said.
"Legitimate companies that are not going anywhere are taken over by individuals who have no sound business reasons, but use the company as a lucrative vehicle for criminal gains."
Nitin Joshi, partner at insolvency specialist PKF, said the rising levels of crime in the channel could prove costly.
"At the end of the day, the cost of fraud is borne by distributors. Screening a credit application now is a lot more than just getting a credit rating. I think distributors could soon be forced to levy a management fee onto every application to cover costs for the full screening process that is needed," he said.
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