To celebrate Halloween 2012, we recently published a sampling of scary scams that have been perpetrated on businesses that tried to buy online from overseas suppliers but bumped into Freddy Krueger instead.
1. When a Stranger Calls
The Victim?s Story: ?I received a call from a man saying his company acted as a buyer for major retailers around the world. He told me he saw my company on Alibaba, and I had the kind of products his customers are looking for. He sent me all the information about his business by fax and asked for a 7 percent commission to serve as my agent, selling my products to his big customers. He followed up by mailing me a letter (on expensive-looking letterhead) containing the same info and asking me to send a deposit of about ?790, along with a free sample of my product so he could show it to retailers.
?I paid a UK bank to do a background check on the company. The bank report indicated that it was legitimate. I also searched the Internet for information and found nothing suspicious. I felt safe, so I sent a total of ?1,000 (deposit and sample costs) to them by telegraphic transfer. They claimed their customers were going to place a big order with us sooner or later. But months have gone by, we never received an order and now we are unable to reach them.?
What Went Wrong:? The cold caller was a scammer who borrowed the name of a respected company to pose as one of their agents, successfully conning the victim out of ?1,000 (less the cost of the expensive letterhead. And postage).
Lessons Learned:
- We admit the voice of a stranger over the telephone can be seductive, especially when heavy breathing is involved. But many a bad horror movie relies on a mysterious caller, and how do things usually end for the callee? Right. Give cold callers the cold shoulder.
- Although the victim tried to conduct a background check through an Internet search and a bank report, this otherwise smart play failed because the research was conducted on an actual company. A simple phone call to the company by this supplier would have revealed that the person claiming to be their representative was an imposter.
- Scammers know that small suppliers are often desperate to establish relationships with big buyers. Posing as agents, they turn this desire to their advantage by demanding up-front payments and deposits?with which they abscond. Legit agents work for you. They don?t get paid until you do.
2. Double Indemnity
The Victim?s Story: ?I dealt with a new buyer and he placed an order very quickly. Soon after, I received a $6,000 cashier?s check from him; however, the amount of this check was in excess of the purchase price. I was requested to wire the balance back to him. I deposited his check and then sent out the products. I also wired back the balance as requested. Then, I was informed by my bank that the buyer?s check was fraudulent. I lost both my money and merchandise to a scam.?
What Went Wrong: This is an example of a garden-variety fake-check fraud. There are several variations. The scammer might offer to pay by having someone in another country who ?owes him money? send you a check. It will be for more than the sale price; you?ll be asked to deposit the check, keep what you?re owed, and wire the rest to the scammer. Or the scammer may send you a check for more than is owed ?by mistake? and ask you to wire him the excess.
In any event, the check you receive will look like the real deal but it will be worthless. Some scammers use phony cashier?s checks, others create checks that look like they?re from legitimate business accounts. You might be fooled into thinking the check is real because in countries such as the U.S., banks are required to make the funds you deposit available quickly, usually within one to five days. But just because you can withdraw the money doesn?t mean the check is good, even if it?s a cashier?s check. It can take weeks for the forgery to be discovered and the check to bounce?and when a check bounces, the bank deducts the amount from your account. You?not the bank?are the loser.
Lessons Learned:
??Fake-check fraud is usually easy to spot. If someone you don?t know wants to overpay you for a product or service by check, asking you to wire him the difference, you are being scammed. Insist on payment for the correct amount.
? Don?t be rushed by a fast-talking buyer. This is a tactic used by fraudsters to get you to act impulsively.
??If you receive payment by company check, try to contact the company on the check directly to verify its legitimacy before filling an order.
??If you do lose money to check fraud, report it to your local police.
?3. Slow Death: The Dismemberment
The Victim?s Story: ?We were scammed by one of our clients. We are exporting silk ties from China. This client is a Korean, but he is doing business in Spain. We exported to his Korean agency as per our contract. Then his Korean agency sent the products to Spain.
?This worked well for several small orders. We received payment quickly after we sent out our products. Then this client wanted to place a larger order and asked for a longer payment period. Considering that the previous orders were successful, we accepted his suggestion. But we never received the $7,000 we were owed for the last shipment of ties. This client always gave me the excuse that he could not arrange payment because of a problem with his Spanish partner. It has been half a year now and still I haven?t received the payment.?
What Went Wrong: Most scammers cheat people out of relatively small amounts of money and then quickly disappear. But some use the long con, patiently cultivating a victim?s trust over a period of time in order to make a bigger score. In this case, a phony buyer gained the confidence of the victim by appearing to be a good trading partner, only to cheat him on a large order.
The long con can be tricky to avoid. By the time you realize your trusted confidant and colleague is actually a serial killer, the hachet is already buried in your forehead. There was a red flag in this case: the request by the buyer for a longer payment period?essentially asking the supplier to loan him the merchandise by shipping weeks in advance of payment.
Lessons Learned:
Caution is advised if a buyer suddenly asks you to be his friendly banker, too. There are numerous well-established payment methods for international trade. Stick with them. And if you feel the urge to deviate from conventional practices, ask yourself: how well do I know this person driving the white van with the blacked-out windows, and do I really want to go for a ride?
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