Equiniti Riskfactor has years of experience protecting lenders from fraud.
As a market leader we have identified that each of these signs alone can be harmless, or even potentially positive. However, when some or all of these signs are combined, there is a greater likelihood that fraud is occurring.
This article identifies 9 common signs that a fraud is about to happen.
1. Increased turnover
There are organisations in every sector who are developing opportunities and growing in their markets. But, for every organisation that is going through growth there are several who are struggling.
Alert: Is the rapid growth you are seeing in a client legitimate or due to increasing numbers of false invoices? Is the turnover aligned to their staff numbers and overheads?
2. Fully utilised facilities and cash flow pressure
A loss making business will borrow every penny – and if that’s not enough, may then try to commit a fraud. And once a fraud starts it can quickly spiral out of control to cover previous falsified statements.
Alert: Is the organisation borrowing … draw every penny?
3. Requests for increased limits
Increased turnover and full utilisation will eventually lead to the client requiring a higher facility limit.
Alert: Is the increase genuine or the result of an ever increasing fraud?
4. Late submission of returns
This can be the result of poor admin or holidays.
Alert: Does the client need to buy time to falsify the sales ledger to hide a fraud?
5. Increased Credit Notes and fall in collections
This can be the result of problems with the debtors or the product.
Alert: It could be a sign that there is fictitious invoicing on the ledger that won’t be paid and is eventually credited out.
6. Cancelled audits or key people and paperwork unavailable
This is a clear red flag. Good quality clients are ready for audits and have nothing to hide. Fraudsters will go to any length to avoid being caught.
Alert: Meetings and audits will be cancelled at the last minute with the client making seemingly plausible excuses for not having their books ready for examination.
7. Overly complex business structure and systems
Most successful businesses strive for simplicity and efficiency in their processes. Fraudsters will frequently try to complicate standard business processes to confuse the lender.
Alert: Look out for clients using complex group structures, billing processes and sales ledger systems to hide false entries.
8. Overbearing, aggressive or dominant management
A classic diversion tactic used by a fraudster is to complain – and complain loudly. The expectation is that the lender will back down.
Alert: Watch out for queries about unusual movements on the account or refusal to increase a limit if they are met with a disproportionate response. Accusations of “lack of trust” or demands for a new Relationship Manager should also be met with scepticism.
9. Fosters unusually close relationship with lender
The opposite of No.8 in some ways – the “best customer” syndrome. This customer never complains, pays whatever he is asked in fees and is generous with his offers of hospitality.
Alert: Be careful as this trick can be used to gain and abuse the lender’s confidence.
Unfortunately, when you see these signs it is probably too late.
Equiniti Riskfactor is the leading provider of risk management software to the global receivable finance industry. The software, EQ Riskfactor, monitors daily transactions in excess of $50bn and has a proven track record of identifying fraud events early and mitigating losses for lenders. In the UK 90% of all receivable lenders use EQ Riskfactor.