Free Fraud Detection Resources
Originally Published in Credit Today, September 2012
One of the simplest ways to detect potential fraud is to confirm certain information provided on a credit application using easy, free resources on the Internet. As a commercial collection agency, we regularly get claims where this has not been done and we discover that the information provided was either misleading or outright fraud. In either case, it is no surprise that the invoices were not collected by our clients. In less than five minutes you can use four free resources on the web to uncover indicators of the most common fraud factors.
The first thing to do is look for the company's website. Frankly, if a company does not have a website in 2012, it is a cautionary indicator, either as potential fraud or as a company that my struggle to perform well in the Internet age. Typically, simply putting "www." in front of the text after the @ symbol in the email address provided by the potential customer will lead to the company's website. If this information isn't available, we simply search on the Internet to find the company website. If the email address provided from an email service, such as gmail, hotmail, etc., that too is a cautionary indicator, either of potential fraud or this being a small business.
The next step is to verify that the contact information on the website is the same as provided on the credit application. This helps to ensure that you have found the correct website as well as confirming that the customer is providing consistent contact information. It is very important to call the phone and fax numbers to verify they are valid. Be careful if:
- The phone is not answered in a professional manner;
- The voice mail system does not identify the company;
- You can't get a live person via the voice mail system;
- It is a cell phone voice mail greeting;
- It is a direct line to an individual.
Make sure you get the company's main phone number, and for smaller businesses get the owners mobile phone number and direct email address. If the business phone is a mobile phone, that typically is an indicator about the size or possibly the legitimacy of the business.
If there is no phone number on the website, that is a red flag. Any company that does not publish a phone number means they don't want their customers calling them. It is difficult to provide good customer service if there cannot be phone communication, and if a potential customer doesn't provide good customer service, how long can their company perform well? The lack of a phone number on a website is a common factor on a significant portion of the fraudulent cases we see.
If the customer indicates they are a corporation, LLC (limited liability company), or partnership, confirm this with the appropriate Secretary of State. Forty-seven of the 50 states have free websites where you can get this information with a simple search. A complete list of these sites with links directly to the search pages is provided on our website at www.kgaction.com/secretaryofstates. Also on this page is a free downloadable file that you can import into your web browser. It creates a favorites folder in your browser with links to all 50 states for easy future reference.
Confirm that the name and address registered with the state is consistent with the information on the credit application and investigate discrepancies. If necessary, use a similar process with the respective licensing authority's online website if the business is required to have a professional license, such as a contractor, real estate broker, or medical professional.
Next, verify that the business address is valid and is a commercial location. Type the address into Google Maps . Use the satellite view to quickly establish the type of building at the location. Use street view when available and you feel the need to take a closer look. Further investigation is recommended if:
- The building does not look appropriate for the type of business;
- Signage viewable on street view shows a different company name;
- It is a residential location.
Most importantly, confirm that this is not a mailbox service, such as a UPS Store, or executive suites location. Over 90% of the fraud cases we see have a mailbox service, executive suites or residential location as a primary address.
There are a number of different ways to try to determine if a commercial location might be a mailbox service such as a UPS store. Google Maps typically will give you a list of the businesses located at a specific address. More research is needed if:
- Several businesses are listed at the address
- The businesses have suite numbers, which might actually be mailbox numbers
- The name of one of the businesses indicates a print, copy, package or mail services
If nothing shows up on Google Maps, do a copy and paste the address into your default search engine for a quick search. In a recent fraud case, Google Maps listed 15 other business names at the location, but not the UPS Store. But, the first result when we put the address into regular Google search gave us the UPS Store phone number at that address.
If you ship merchandise to a mailbox, you are not going to have proof that your customer actually got the merchandise. You will only have proof that it was received by the mailbox service (or executive suite in that scenario). Your collection agency will also be at a dead-end if the debtor skips on payment.
If you suspect or confirm that an address is a mailbox service, ask the company for their physical location and confirm it. If the location is a mall unit, confirm that it is a physical store and not simply a kiosk in the common area. Confirm any home addresses provided through Internet search and maps. It is critical to have a home address if the business does not have a permanent physical location or you get a personal guaranty.
Finally, use the Internet to get the phone numbers and other contact information for the trade references provided by the potential customer. Some fraudsters provide the name of a legitimate company as a reference, but the contact information is directed towards a conspirator instead of the actual company.
If you are dealing with a legitimate, established company, this process can take less than five minutes and be performed by anyone who uses the Internet. This is not meant to be a comprehensive list of fraud detection activities. Nor does the uncovering of a cautionary indicator mean fraud is being attempted, just that further investigation may be warranted. In these cases, you may want to get additional forms of contact information, a copy of driver’s license, business license, or utility bill for the business, and check trade references and credit reports more carefully.
Dean Kaplan is President of The Kaplan Group, San Luis Obispo, CA 805-541-2639; email@example.com