Companies House – user beware
“Long firm fraud” given a helping hand by the openness and visibility of the information at Companies House...
As my long departed Great-Grandmother used to say to me “There’s nowt new under the sun”. Long firm fraud has probably been around as long as credit itself - a nice little earner, much used back in the 1960s by East End villains, has not gone away and in this era of increasing identity theft, this type of fraud is very much on the increase.
A long firm fraud uses a trading company that has been set up to appear to all intents and purposes as a legitimate business. Quite often a company, that has been dormant at Companies House for several years, is reactivated. Several years of glowing accounts are filed overnight, bogus lists of shareholders and directors are posted and then the company starts to buy goods and services and pays its suppliers promptly in order to quickly secure a good credit record. Couple this misuse of Companies House with a good looking web-site [with content usually taken from other genuine sites] and the fraud quickly acquires a patina of respectability and the impression of a bona fide business. Once the fraudsters are sufficiently well-established, they then purchase the next round of goods on credit and disappear with both the goods and profits from previous sales. The procedure needs a certain amount of money to set up, often the proceeds from other criminal activities, but once the fraudsters are ready to execute the final sting of ordering significant quantities of goods on credit, the hapless supplier is usually not aware of the fraud for another 90 days.
Any saleable commodity can be the subject of fraud although certain goods are preferred because they are not easily traceable and can be disposed of very quickly. Building materials, wines, spirits, and sweets used to be the staples as they all had a high turnover and could be sold on easily. Nowadays, high value audio/visual products, computer products, mobile phones, furniture and high-end merchandise including clothing, branded accessories and sports goods are often the subject of these frauds too. In a recent court case in Liverpool, the police came across a warehouse full of brand new car tyres that had been acquired using the long firm fraud method.
As a Companies House spokesman has recently said to the national press, Companies House “does not have statutory power or capability to verify the accuracy of the information that companies send to us and this is made clear on our website”.
It goes without saying that all firms should ensure that their credit management is overseen in a professional and knowledgeable manner, but here are some other things that you can do to protect your business:
- Always ask for trade references (the more the better) and always take them up in writing and verbally.
- Ask for original company headed notepaper, not copies.
- Obtain up-to-date accounts and take a reference from the external accountants
- Always obtain a banking reference
- Check any VAT numbers provided.
- Credit check the names of company directors for bankruptcy orders and CCJ’s.
- Confirm any telephone numbers provided. Never accept mobile phone numbers for companies.
- Never accept handwritten orders or faxes.
- Do not allow the delivery of goods to different addresses without checking them.
- Look up the Registered Office and Trading Address on Google-it is amazing what you can see utilising the Street View technology
- Know your customer. Are they who they say they are? Ask for personal identification preferably with a photograph.