How to protect your company from fraud?
A promising deal is presenting itself for your company: a foreign company is interested in your product and wants to order. With a maximum of 50% payment up front, if at all-a usual practice in that field. Naturally you want to grasp the chance! This is one of the main goals-profit! Still, you might face troubling thoughts and questions: is the company you are about to go into business with legitimate? Are the people behind it real? Are they the ones who have the legal right to represent the company? What if it’s a scam? What if they get the goods and disappear?
Financial fraud is more common than you might think. The Association of Certified Fraud Examiners report that U.S. Businesses will lose an average of 5% of their gross revenues to fraud. Every company’s goal is to make profit so it is only logical we want to make deals even if it means taking huge risks with business partners whom we don’t know at all.
Victoria Saue, the COO of Entify brings an example of a deal gone bad „One of our clients, a well-known food industry corporation, reached out to us after losing a large shipment to a fictitious company. They were contacted by a business from Ukraine asking to buy their products on credit — a regular practice in their field. A background check of the business on Google — their website, address and contact details — and their highly professional interactions with the buyer gave them a false sense of trust. Soon after the first shipment, the invoices were left unpaid. They had become a victim of B2B fraud.“
Although there are precautions to detect fraud, not all companies are using them. We have enlisted five ways that help to protect your company against fraud:
Make background checks/Google
Google the name, location, beneficiaries, the industry field and see if there are links to other companies, bad press, scandals or any warning signs. A warning sign is if there is no information and in case there is a lot of information, investigate the dates. If there was a lot of information to a certain point but then the publicity stopped, it could be a sign that the company was sold, is going under etc.
Call to local government offices
Local government has the information about all registered companies and it is good to start from there (after the almighty Google of course). Ask about the company, when it was created, the people connected to the company, contacts, any troubling signs.
Find a native speaker to ask around and make local checks in local language (that you cannot google)
It helps to have a native speaker to review all media, articles and ask around about the company. You can also estimate the size and reputation of the company (if the company should be large but no one has heard of it, it could indicate something is not as it seems).
Ask for a video call and documents
Document and video call images should correlate. Ask the person to hold their document next to them in a video. It is much more difficult to fake the video than it is to fake a document.
Outsource (SaaS or specialists)
There are many highly valued specialists in the KYC (know your customer) and KYB (know your business customer) industry. An alternative is a software that does this for you. While choosing, keep in mind the principles for what you will need the verification. Does your company need to comply with regulations? What are the regulations in your country? Do your business partner’s country regulations play a role? Do you need to know the ultimate beneficiaries? Is it important what the reputation of the company is?
By incorporating ‘know your customer’ methods to the ways you’re doing business daily, you can create a more sustainable future for your company. Trust and reputation are created slowly, with great effort but broken easily with a blink of an eye.
Entify is a full legal entity verification solution that enables KYC both for private and corporate customers. The KYC market is estimated at 5.6 billion and it’s estimated annual growth is 16%, exceeding 11,8 billion by 2022 (according to OWI Labs’ market research), making it one of the fastest growing areas in finance.
