In our last blog, we highlighted some of the dangers businesses face from fraudulent operators posing as legit companies, but whose real intention is just to rip you off.
So what can you do to avoid these risks? The answer is all about due diligence and knowing exactly who you are dealing with before you make a payment or sign a contract. Nowadays, formal ‘Know Your Customer’ or KYC background check services are available as byproducts of strict anti-fraud regulations in the financial industry.
But as useful as such services are, there are simple things every business can do directly for themselves to check out the credentials of any potential new client or supplier. Here are three simple steps to take to avoid being ripped off.
Company website
A first port of call is a company website. There are a number of pieces of information which limited entities are required to publish on their website by law which can then be used to run further checks (and if any of this information is missing, alarm bells should sound). This includes:
- A registered business address
- A telephone number (preferably landline)
- A company number.
If any of this information isn’t published on the footer of every page, look for a privacy policy or terms and conditions. The presence of these can also provide some indication of the business’s approach to governance, although these can easily be lifted from elsewhere when setting up a bogus business site, so shouldn’t be taken as proof of legitimacy purely by themselves.
Finally, don’t forget to run a quick search on the who.is database as this will show you when a URL was registered, be very wary of supplying goods or services to any company with a website set up in the last 3-6 months. Especially if the website tries to give the appearance of a long running or established business entity.
Companies House
When you have a registered business address and a company number, you can look up a company’s filings on the Companies House website. For limited companies, this is where all records required to be registered by law are stored (and is where credit reporting agencies source their information when rating businesses).
If a business claims to be a limited company (i.e. has Ltd, Limited or PLC after the name) but has no filing at Companies House, or the company number brings up a completely different entity (i.e. with a different registered address or name), you should be very suspicious. However, having records on Companies House alone is not proof that you are dealing with a legitimate, trustworthy outfit.
It’s unfortunately common for con artists and rogue traders to go to the trouble of setting up registered businesses through the proper channels as fronts for their activities. Very often, these individuals will change businesses frequently to avoid detection.
This can be used as part of your background checks. If you look up the company directors on the Companies House filings, you can then run separate searches by each name. This will tell you whether any director has previous associations with failed companies, or any strikes against them for not complying with the legal responsibilities of directorship. It’s important to search separately by a director’s name, not just from within a company listing, because rogue operators will often not declare their past company directorships to try to avoid scrutiny of their past.
Basic details
Finally, whether you’ve grabbed them from a business website or you’ve been handed them in an email, brochure or business card, a very basic principle is to check out any and all details you are provided. If you get a phone number, for example, try it out - does it work? Who do you get through to? Do they answer in a professional manner, e.g. by announcing their association with the company you are expecting to call?
If you have an address, run a quick Google search or look it up on Google Maps. Is it genuine? Are there any images showing the business premises, preferably with the company name on? Be aware that, these days, many addresses provided for a business are, in fact, virtual offices, or the address of the accountant or agent the company works through. With so many digital-only businesses around, lack of their own physical premises is not in itself a sign you need to be cautious, but is another factor to consider.
Another good tip is to look up any social media links you can find associated with a business, be it Facebook, Instagram, LinkedIn etc. While many fraudsters are happy to build professional-looking websites as fronts for their sham operation, it’s unlikely they will go to the same degree of trouble with multiple social media accounts. Do the social media pages look active? How many followers does the business have? This is also a great source for looking up user reviews and feedback.
Overall, on their own none of the above can tell you whether a company you are thinking of doing business with is legitimate or not. But taken as a whole, they can give you a strong indication of whether a business is what it says it is. If multiple pieces of information don’t add up or alarm bells ring across several of the checks, your safest bet is not to get involved.
