Fraud Cases Highlight Need To Be Vigilant

Would you know what to do if you were the victim of fraud?

We were recently alerted to an incident involving one of our member companies that saw them lose $750,000 of product.

Our member had been approached by a new customer so completed the usual vetting process and checked their credentials. After a rigorous credit check, they opened up 30-day payment terms and arranged a shipment. It turned out the deal was a scam.

The buyer had disguised itself as a legitimate firm in good standing, stealing another company’s credentials and claiming to be based out of one of its recently closed branches in Montana.

The authorities had been alerted after an attempt to pay demurrage fees in cash rather than credit or check. The member company ended up tracking down the missing product and the 10 containers were soon retrieved.

The group behind the theft was based in North Africa. They have been posing as real companies, applying for credit terms, and taking product for resale without ever paying.

Our member had no idea it had been caught in this trap. It had done everything to the letter, carried out all the checks and due diligence.

Fortunately, they recovered the shipment and recouped their money. On this occasion, no harm was done – but this kind of financial loss could really hurt a business and potentially hazardous chemicals could have ended up in the wrong hands.

While this certainly doesn’t appear to be a common occurrence, we have heard several reports of similar scams over the past 18-24 months. Another case under investigation involves a chemical shipment worth $160,000.

These are not insignificant sums and highlight the potential risks our industry routinely faces on a day-to-day basis.

None of us want potentially hazardous chemicals to get into the wrong hands for nefarious purposes and these financial losses could ruin a business.

You certainly don’t want to be caught out, but you also don’t want to risk losing a genuine customer that you could potentially work with for the next 20 years.

So, what can you do?

• Take your time and be thorough. Carry out all relevant searches and credit checks.
• Research the company – find out where it’s based and confirm addresses, emails and phone numbers.
• Find out about the CEO and senior executive team. Is it worth carrying out criminal history checks, for example?
• Ask around. Have any of your colleagues, competitors or other NACD members dealt with this company before?

Fraud is not a new phenomenon, but we implore you to be vigilant – especially during these tough times when incidents such as these appear more commonplace.

Rest assured, NACD is working with intelligence agencies and will continue to liaise with the FBI about these cases.

Should you have any concerns or suspicions when approached by a new customer, we encourage you to be thorough with your checks and, if necessary, reach out to your local FBI office or NACD for advice and guidance.