Preventing fraud when sourcing from overseas

by Tekle Sebhatu

As national boundaries become more permeable to trade and investment, so increases fraudulent activities. In the old days scammers used to meet face-to-face with people upon whom they prey. Now, modern technology has allowed con artists to globalize and to become more sophisticated using e-mail, message boards and chat rooms to effectively con individuals and businesses. A con artist can be anywhere at any time and he or she is just a click away from his 'mark", a term used by scammers to identify a victim. Anonymity, ease of promotion and reach on global scale that technology offers are contributing to the rapid expansion of fraud.

International trade fraud is not confined to any particular region, country or industry. Because of increased scam activity, sellers who have a good product to sell are becoming reluctant to go international, and, therefore, remain domestic and lose millions of dollars from global sales. While your company might have legal resources to help go after con artists in your country, the legal remedies outside your country to catch and punish these fraudsters are almost non-existent.

There is no sure way to protect your company against con artists other than to be educated on the different types of scams that keep constantly changing with technology. Here are the most common international scams that you should watch for:

419/Advance Fee Scam: Also known as a Nigerian or West African scam, this type of fraud is named after an article of the Nigerian penal code under which it is prosecuted.

This "the mother of all scams" scheme typically starts with a letter from Nigeria or another country thatoffers the recipient the "opportunity" to share between 20% to 40% of millions of dollars that the author, a former government official or relative of high ranking wealthy government officer, is trying to transfer illegally out of Nigeria. If the victim is interested then he will be asked to forward documents including bank account number, blank company letterhead, telephone and fax number and other documents to make it look real. The possible victim is then asked to deposit money into a bank account provided by the scammer to cover expenses and complete the process. The scammer uses the funds deposited in his account to commit other crimes.

Escrow Fraud: This involves a third-party escrow service company to help facilitate the exchange of money and goods. The scammer advises the victim to use an escrow service website that the scammer created. The website resembles a legitimate escrow service company website. The victim sends the payment through the bogus website or the victim sends goods and waits for payment.

Letter of Credit Fraud: Letters of credit are always issued by the buyer's bank (issuing bank) and are forwarded to the advising bank located in the seller's country to notify the seller. Scammers often produce identical documents that a bank produces and then they send the documents directly to the seller. The seller assumes that these are legitimate documents from a bank and ships and waits for payment by his bank that will never happen. Another common letter of credit scam is presentation of false shipping documents by the exporter to the advising bank to show that the goods were indeed shipped and payment has to be made, when in fact the goods were not shipped.

Phishing Scam: A scammer attempts to extract sensitive information such us a credit card number, password, drivers license or passport number that can be used to commit crimes using the victim's identity. Most phishing scams start with an email or instant message sent to the victim. The message asks the possible victim to update personal information in a website created by the scammer that resembles an institution's website that the intended victim does business with. The victims personal information is then used to commit crime.

Counterfeit International Money Order and Cashers Check Scam: A scammer agrees to buy goods with the arrangement that payment be made usingan international money order or cashiers check. The money order or check that appears to be authentic with all the bells and whistles, including magnetic routing codes and name of a legitimate bank, is directly mailed to the seller and is often higher than the value of the transaction. The scammer suggests the seller to keep a portion and immediatelywire back the rest into the scammer's account. The seller approaches his bank to cash the counterfeit money order or cashier's check after sending the extra funds, only to be told that it is fake.

Click Fraud: Also referred to as pay per click advertising, the scammer will imitate a legitimate website. A user will click on an ad to purchase and all financial information is provided to the scammer through the website. The scammer then uses this personal information to commit a crime.

Eight ways to avoid fraudulent activities:

1. Educate yourself. Remember that there are several types of scams, learn what scammers are looking for. Watch out for new scams.
2. Investigate. Do a thorough investigation yourself. Do not depend on message board answers, because the same person who is trying to scam you might respond to your message with positive comments
3. Be patient. Do not make quick decisions. That is what exactly scammers want you to do, to make fast irrational decisions. Remember that every journey starts with a single step.
4. Use common sense. Look for red-flags like high returns, complex transactions and letters or messages that are not professionally written.
5. Do not be greedy. Do not let greed drive you to take an unnecessary risk. Remember the old saying "If it looks too good to be true, it probably is!"
6. Be skeptical. Question every aspect of transaction very carefully. It is good business.
7. Ask for references. Check with government agencies including trade agencies or chamber of commerce of the seller or buyer country, invest time to verify legitimacy of the company or individual.
8. Country of origin. The location of a scammer is irrelevant a scammers can be any where including in your community.

Use the following websites to learn more about fraudulent activities.

• Federal Bureau of Investigation (FBI)
  Common Fraud Schemes
• Fraud Aid .com
  Letter of Credit Fraud: Truth vs. Scam
• U.S. Secret Service
  Public Awareness Advisory Regarding "419" or "Advance Fee Fraud" Schemes
• Looks Too Good To Be True
  Types of Frauds

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