Short and long firm fraud

Such firms deal with services or products where they prefer those that are not recorded and cannot be tracked by the authorities. For example, they may deal in items like collectables, luxury items or electricals. Such frauds lead to financial loss as the victim may not have legitimate goods, or you may supply goods to bogus firms that do not follow any rules or standards. Moreover, such organisations do not act in an accountable manner.

Multiple short firms operate only for a few months and may become undetectable after some time. It may not try to build a relationship or create a credit history. Such firms often have fake accounts of a limited company at the approved registries, and they do not indulge in day to day activities. 

Furthermore, they use the credits to get goods to be delivered to third party addresses. Sometimes, they work through multiple occupancy trades where goods are offered for cash, and illegitimate funds may be used to buy the supplies. Once they sell the goods and get the money, they disappear. 

In the long firm, the criminals place multiple small orders to the wholesalers, paying the seller. However, once they establish a relationship and build trust, they place several large orders, but they disappear after getting it.

How To Spot It?

• If you are a wholesaler who gets a lot of small orders from scammers, who place larger orders but disappear without paying.

• If you supply items to people with no credit history or those who do not have a reliable way of doing business. 

• The seller or buyer may assume they lost a small amount but may face serious financial losses and a bad reputation in the market later. 

How To Protect Yourself?

• Evaluate all the orders carefully before placing and check the trading history of the suppliers carefully or the business you are dealing with.

• Get the trade references and check the authenticity of the referee. The criminal may sometimes provide references about each other.

• Examine the accounts filed of the firm and see if a genuine accountant prepares the reports.

• Review the credit history of the people who run the business and monitor the firms' databases at authorised websites to see if the people representing the firm are bankrupt or disqualified to act as directors. 

• Verify if the goods are delivered to the person or address mentioned in the order requests. Do not allow your supplies to be cross-loaded by unidentifiable people waiting for them at some unidentified location. 

• Always order through reputable sites and compare all the terms and conditions.

• Always try to find out the evidence of the location of the business and verify the Ids of the executives or board members.