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Business trading frauds

It refers to long/ short, insolvency, corporate identity and bankruptcy-related frauds. In case of long and short, a seemingly genuine firm is set up to defraud the clients and the suppliers.  

In the case of long, the business appears reputable at the start; it has a positive credit history where the buyer trades with the company, makes large orders and supplies resources. But later, the merchant disappears without fulfilling the agreement and paying for the promised goods or services. 

Short firms are those with bogus operations set up for a short duration. They have no regular business. Instead, they acquire business on credit and deliver it to a third party, disappearing without paying the client. They often sell the goods for cash. 

They may have registered for several firms with fake directors at Companies Houses. They may provide fake enterprise details to appear trustworthy. They sell their assets immediately before being declared insolvent, or they may indulge in illegal trading while suspended. 

How To Protect Yourself?

  • One should try to get full customer details that include personal details. 

  • Examine the trade references and try to get recommendations from multiple sources. For example, one can seek bank-related evidence like getting credit details. 

  • Confirm the business location address and contact the directors to know about the business. 

  • Check the company's details on open source databases to know the names of the directors and trade. 

  • Do not accept handwritten orders; ensure all the related information is accurate. 

Phoenix / insolvent firms 

Such an organisation has the same directors from the loss-making unit. The directors transfer all the assets of the loss-making unit at a lower price before declaring insolvency. 

This way, the directors reduce the funds available to the creditors, allowing the core business and owners to continue business operations. Such frauds involve the re-use of prohibited/disqualified names & directors. 

What Are the Basic Rules?

  • The old company's assets should be sold or purchased for a fair price.  

  • Before liquidation, the regulators have to ensure creditors' interest.

  • The firm's representatives should notify the creditors about the sale of assets in 2 weeks.

Date Published: Sep 13, 2023

Types of fraud

A-Z of fraud

To help understand which fraud you've been affected by, we've categorised them into an alphabetical list.

What is fraud and cyber crime?

Cybercrimes can be of two types. First, it can be cyber dependent, where the fraudsters use online devices to convince the victim to accept their offers.

Advance fee fraud

If you are trying to get a loan for a house or a car, they ask to meet the provider to get the financing arrangement and pay the finder's fee in advance.

Corporate fraud

Corporate frauds can be complicated, committed either by the firm or an individual. Nevertheless, it mostly involves cheating where the employee or the firm.

Individual fraud

There are many types of individual frauds related to advance fees, investments, insurance brokers, bogus tradespeople, Ponzi schemes, pension liberation.

Online fraud

Hence the number of cases of online fraud is increasing each year, and most such cases include – account takeover, direct frauds, or scams related domain names.

Identity fraud and identity theft

The criminal uses the stolen identity of another person living or deceased to conduct unlawful activities like obtaining goods or services in another's name.

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