Rise in Bogus Credit Applications Found in UK Report

Following on from National Identity Fraud Prevention Week, which ran in late October, Graydon UK has discovered that as many as one in three UK businesses have been approached by fraudsters trying to obtain goods under false pretences in the last two years.

Graydon UK conducted a survey amongst those working in Credit Management departments in a business-to-business environment – which came up with some alarming results. The study found that one in three respondents (36%) had personally received a credit application from a business wanting to obtain goods and/or services from them fraudulently.

The results also showed that a similar percentage (29%) believed that the problem of fraud was getting worse compared to the previous year; and would continue to remain a growing problem. Only 6% of those surveyed thought that the problem was reducing.

Graydon UK also undertook more detailed interviews with some of the survey respondents and corporate identity theft was highlighted as a key factor in many of the cases reported.

In one example, the sales department of a company received an order for 100 monitors to be delivered to a business address. As is normal practice, the sales staff then ran a credit check on the company through Graydon UK and found that the company had a credit limit of approximately £20,000. The order was then processed even though the actual delivery address on the application form was not the same as the address on the credit report and the sales staff did not request a signed copy of a company purchase order.

The company then discovered that the delivery address given had been hired for the day by an individual, and was not the address listed on the Graydon UK credit report. When delivery took place the individual who had ordered the monitors was not on site to receive the monitors, but returned later that day with a van to collect the monitors. He was not seen again. It would appear that this individual had successfully stolen the good name and creditworthiness of another company and borrowed its identity for a day to commit a crime.

There are many simple protective steps companies can take to guard against corporate identity theft. For example, company purchase orders should always be obtained, and any orders over a particular amount can only be delivered to the address shown on a bona fide credit report, unless one of the sales staff meets with the company. Watch out too for delivery addresses that look like residential addresses, mobile phone numbers and non business type e-mail addresses on credit application forms.

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Tips how to prevent fraud

Before giving the green light to going into business with any given client, it is worthwhile taking a few steps, which will go a long way towards protecting yourself from the risk of fraud.

Always obtain a credit report on the business
Never set up an account until the application has been fully processed
Check the application for quality and completeness
Always check the trading / registered office address
Be wary of mobile phone numbers and non-business email addresses e.g. hotmail, yahoo etc
Know the true identity of your customer
Most companies will pay their bills by completing a purchase order for their accounting department, obtain a signed copy of this
For non-incorporated businesses, request original copies of utility bills
Double-check all delivery addresses
Keep an eye out for residential addresses

It is also important to flag certain events and details that seem out of the ordinary:

Is there a sudden change of delivery address?
Is there a last minute call to collect the order?
Is the delivery address different to that shown on the credit report?
Are the telephone numbers fixed line or non-geographic?
If the answer is ‘yes’ to any of these…then ask why?

Survey Methodology

Graydon UK conducted a survey via email between 11th and 19th October 2006.
Graydon received responses from 320 credit managers, financial/credit controllers and finance managers in the UK.
40% of the sample use Graydon for credit information and 60% use other credit reference agencies.
The participants were asked the following two questions: