Let's talk about fraud.(commentary)

At the end of the year, many companies write off bad debts without a second thought. How many times have those accounts actually been investigated for fraud? It is time that we equip ourselves with the tools and knowledge to prevent these fraudsters from entering our world of business for their financial gain.

You have just received a credit application for a company in Nigeria for a large order of computer LCD screens, projectors, and inkjet cartridges. Against a gut feeling, you process the credit application and authorize a $28k order to be shipped. After all, they supplied credit card payment information. Then, overnight, it seems this company has vanished--just after you received notice that the credit card used to purchase these products was stolen.

Over dinner with a friend, you discuss a few (nameless) accounts that have raised questionable doubts of integrity. Not finding a significant reason to share your Nigerian account experience, you learn from your dinner companion that fraud and deception exists right here in the U.S.! One account had a glowing credit report, impeccable trade references and promising financials. So what went wrong? The perpetrators had started their operations of deception five years prior, incorporating their business and exemplifying a steady stream of inventory and revenue. Paying bills on time and maintaining the image of a reputable business were just a few ways that this subject was able to keep up their scheme. As the old saying goes, "robbing Peter to pay Paul" is exactly what these criminals did until they were able to reach a comfortable limit to take each supplier for thousands. Unfortunately, all of this information was not discovered during due diligence. However, your dinner partner goes on to describe that through an industry credit group meeting more revelations surfaced. Later, using a database containing decades of independently verified fraudulent activity, additional company names and addresses were identified linking the principal to previous fraudulent activity.

The fraudulent Nigerian account may not have been a shocking loss due to the dramatic increase in sophistication of publicized schemes within the recent years. But what about the U.S. account? Surprised to hear that the perpetrators were able to maintain their five-year fraud? Although they were paying their bills in the beginning, the losses were incomparable.

With growing technology comes the advantage of convenience, but the disadvantages must be considered. Using traditional credit processes to weed out these white-collar ...