Credit Reports

Commercial Fraud Tactics & Reference Check Scams Revealed

We've all become well educated on the increasingly bold moves fraudsters take to steal personal identities, to secure jobs, cars, homes and more; but what about business-to-business fraud? As a small business owner, how much thought do you give to fraud protection for your business?

You have much to fear and even more to lose if you become a victim of commercial fraud. Approximately 30 percent of all commercial credit losses are attributed to some type of misleading or fraudulent information. How do these fraudsters operate?

• "Bustouts" or "overbuys" - These terms describe criminal activity designed to obtain large amounts of merchandise without paying for it.
• Hit and run - A swindler moves into a location and orders merchandise COD, paying with phony certified or cashier's checks. By the time the check bounces, the "skip artist" has moved on to a new location to repeat the fraud.
• Advanced fee scams - An up-front payment is obtained for services to be rendered after, supposedly to cover costs. This advance fee is accepted with no intention of providing the service.

The net result is that financial damages from these and other business scams far overshadow losses from consumer fraud. On average, losses are three to 10 times higher.

Reference Checks Require More Than a Phone Call

Verifying references is a regular activity for small business owners, but as you make the phone call to check a reference, did you ever stop to think that the person on the other end of the phone might not be who they say they are? Fraudsters will take advantage of your trust in many devious ways:

• References supplied by a fraudulent company may not be all they seem at first glance. To avoid being lulled into a state of complacency by a company with all the right references, re-examine those references with a more critical eye.
• Be suspicious if a reference provided by the new customer gives an instant "glowing" account without taking time to consult records when you call.
• Other businesses and friends or partners of the fraudulent business person can fake bank references. Take care when you are provided with a specific extension from an individual and are told to "Ask for Joe."
• Answering services can be used to provide a false confirmation or reference.
• Beware of hard-to-trace fax numbers supplied as the only way to contact references. They may all lead to a single location where one individual can respond to reference checks using a variety of business names.

It's unfortunate that B2B criminal activity is on the rise, but you need to protect your business. Data validation on business information is an invaluable step. One of the best defenses is to compare reference information with online credit report data to keep your business safe.