shu-fraud-untrustworthy-595931750-jesterpop-1500x1000Has your business ever encountered a customer that appears too good to be true?

Take this common scenario – you’re in a business that regularly supplies customers with goods. You have a new customer and when placing the first order, that customer offers to pay upfront, almost immediately and even perhaps before being invoiced. That’s a customer any business would like, but they may have a plan to induce you into a false sense of trust, leading you to drop your guard and open to being exploited.

Types of fraud from dream customers

Fraudsters posing as customers happen online and also in a brick-and-mortar business. They can be local or international. Their methods can range from not paying for goods, using someone else’s credit card or forged currency to pay for the products, using a false identify, overpaying you on purpose and asking you to wire the difference into another account before the funds are cleared, among others.

An example of a dream customer turns fraudster

The first few orders go smooth and they are always right on the money, then gradually the orders grow bigger and out of a sudden, a few large orders are placed and they ask for short-term credit terms. You deliver the goods but the payment is not received. Then they either disappear or the company they operate ceases to trade. The upshot is, you have been duped and your business is left without payment.

Why does this happen? Most unethical or fraudulent activities are fundamentally based on psychology and human nature. We humans want to be liked and trust other humans, so when we feel we can trust someone, we can all too easily drop our guard. That’s when the fraudster will pounce and take advantage.

How to protect yourself from ‘fraudulent customers’

They are several ways you can protect yourself from fraudsters posing as customers and we would like to share a few tips. It must be noted that this list only intends to provide information of general interest. It is not specific advice tailored to your specific circumstances which may require a more radical approach.

  • Check if your customers really who they say they are – conduct a business background check to find out if they are really who they say they are. At Blackhawk Intelligence, our business background check specialists can provide detailed reports with regards to their financial and legal information. You can use the information to establish if the customer is trustworthy and make an informed decision.
  • Have robust policies and procedures in place – regardless of how big or lucrative a business deal is, don’t defray your business from its preventative checks and processes. Train your staff to spot patterns and give them the authority to check out publicly filed records. Do not proceed if you suspect something is amiss.
  • If you trade online, implement an extra layer of customer authentication by using a verification tool.
  • If you’re asked to wire the difference between the amount of the invoice vs the amount they claim to have paid, verify the money is in your bank and report any suspicious debits to your bank.

For more information, check out this ‘Corporate Fraud Detection‘ page.

What to do after your dream customers have turned out to be fraudulent?

While Action Fraud asks you to report fraud cases to them, the reality is that they usually act on it very slowly and not every case results in an investigation as the police only get involved if they believe the fraudsters are from an organised network who have stolen large sums from multiple victims.

The sobering truth is that often you won’t get your money back, so prevention is key. Train your staff, have an established procedure in place, check up your clients are some of the best prevention methods you can have to reduce your risk of being duped by a fraudulent customer.

Also contact Blackhawk Intelligence – as highlighted in our ‘Corporate fraud and how Blackhawk Intelligence can help‘ page, tracking down suspected business fraud and advising how to prevent it is part of our core business. Our objective is to provide you with a cost-effective solution and we usually give you a plan of action before you decide to hire us.

To find out more, call us today on +44 (0)20 8108 9317. We can assess your situation and work with you to put your mind at ease.

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This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.