Resellers issued with 'long-firm' fraud warning

Target Components raises alarm after one of its customers hit by £20,000 fraud attempt

Resellers have been issued with a red alert by distributor Target Components after one of its customers was hit by a "long-firm" fraud attempt.

The Yorkshire-based distributor has emailed all its customers warning them that one of its clients - an independent reseller - lost out to the tune of £20,000 after crooks took delivery of a large order of processors before promptly vanishing.

The form of fraud is known as a long-firm fraud due to the many months the perpetrators spend lulling their victims into a false sense of security.

In common with short-firm fraud, long-firm fraudsters commonly hijack the name and details of a legitimate business, often a dormant company. But while a short-firm fraudster will go straight for the jackpot, long-firm fraudsters build up a credit history over a long period of time before they increase their order level, take delivery of the stock and disappear.

In this case, the conmen in question built up business over a six-month period to about £20,000 before committing the deed, said Target managing director Paul Cubbage.

Both long- and short-firm fraudsters are turning their attentions to independent resellers because their previous meal ticket, distribution, has spent recent years tightening up its processes, Cubbage (pictured below) said in a post on Target's business blog site, ShopTalk.

"This is a substantial business-threatening amount for the retailer, but in this instance the fraudsters have been tracked down to a residential address, and at time of writing there is still some optimism that they may recover the amounts owed," said Cubbage. "Others have been less fortunate."

Concerned resellers can look for a number of tell-tale signs to thwart the fraudsters, Target said. These include checking Companies House to see if the customer has filed several years of accounts in a short period, performing a "who is" check on the website and exercising vigilance over firms that used to operate in a completely different sector.

Fraudsters are drawn to technologies that are easily sold on, such as processors, hard drives and laptops, Target warned. Over-elaboration, where the client may introduce themselves as ‘Dr' or ‘professor' to give themselves a professional air, was cited as another classic giveaway.

A comprehensive explanation of long- and short-firm fraud can be found on the Action Fraud website along with its own tips for protecting against such frauds, Target pointed out.

Nitin Joshi, director of business advisory firm ChannelMoney, urged VARs to tighten up their client-vetting procedures. He agreed that a recent fall in distributor fraud had been supplanted at a reseller level.

"The distributors have all now got pretty sophisticated screening procedures in place to weed out fraudulent credit card applications," Joshi said. "But the largest VARs don't have these systems in place and there are maybe 50 VARs which are ripe for being targets [for this type of fraud].

"If they want to avoid fraud, they need to invest money in upfront credit-vetting procedures. They aren't doing enough and they need to do more."

Eddie Pacey, managing director at EP Credit Management, said subtle and stage-managed long-firm frauds are still beating channel firm's defences due to the need to do business.

"A correct process is one where you introduce solid controls within credit and do not allow anyone outside this area to over-ride them," he said.