Corporate services fraud

It can be very difficult to demonstrate wrongdoing by the directors and administration of a company and identify the directing mind and will in modern systems. However, the common types of corporate service fraud include bogus / manipulated accounting, supply chain/procurement & payment fraud, and travel and asset exploitation fraud. 

How Does It Happen?

• The company formation agents work on behalf of their clients and form organisations to commit financial fraud. 

• Fraudulent trading is when a company deliberately conducts business to defraud the creditors.  

• Long (and short) frauds refer to the organisations set up by criminals who initially trade legitimately to establish a reputation, get large orders on good credit history, and then disappear without fulfilling the orders. Short firms disappear in a short period. 

• Some Phoenix firms are formed with the illegally transferred assets of a failing business that is left with a trail of debts and creditors. 

• Some are formed essentially to indulge in fraudulent activities to create an illusion of a secure, reputable institution that solely aims to dupe customers, suppliers and investors.    

How To Identify It?

• They approach the firm and offer a discount to process transactions on behalf of a third party.

• They make last-minute changes in delivery and request the supplier send items to a different PO box or guest house. Sometimes, the trickster steals the firm's account details and makes payment over the phone or using a compromised card. They indulge in card payments, which can be possibly larger than normal.

• They sometimes claim we are working for a payment service, and there are problems in the terminal and request card transactions.

How To Handle It?

• Businesses should be aware of malpractices and train staff to handle bogus clients and payment requests.

• The regulatory agencies can investigate failed firms, and the outcome can be "no further action," "director warning," "winding up", or "disqualification." Nevertheless, in some cases, the investigation may lead to criminal charges and prosecution. 

• To safeguard, you need to ensure you are investing in a legitimate business. One should inquire about the company before investing in its schemes or products. Anyone who suffers losses due to such fraud should report the crime to the authorised agencies.