Fraud Advice

Identity theft is a subject that is raised and discussed at many fraud forums and similarly reported in an increasing number of news articles. It is not just the cloning of identities followed by fraudulently obtaining goods or services on credit cards that results from identity thefts. Some very complex frauds are built on false identities and credibility stolen from others.

A report in this week’s Financial Mail in the Mail on Sunday illustrates how such fraud might be working. It involves a potential boiler room fraud which involves the selling of bogus or worthless shares in business ventures by high pressure salesmen. Credibility to their product is provided by details of another real and likely more successful venture whose details can be checked in the public domain.

In this case it appears that an oil company is touting for investment in its two “proven” oilfields. Its web site gives details of a director that are the same as those of another company Petroneft Resources who also has oil fields in Lineyoye and Tungolskye, names that are curiously similar to those quoted for the other bogus oil company. The bogus oil company cannot be contacted and its address details given are false. Petroneft, which is based in Ireland and is clearly a bone fide company, was astounded to find that there is another company that appears to be advertising the same assets as it owns.

Petroneft has reported this instance of credibility hijacking to the Irish Financial Regulator, Financial Services Authority and City of London Police. The FSA say that incidents of identity theft and associated unauthorised sale of investments in typical “boiler room frauds” has increased dramatically over recent months. In the last three months alone it has received 29 such reports.

It does seem that even with the current economic climate that there is plenty of money that investors are seeking to find homes for. This may be a case of moving funds around in an increasingly competitive market or there being more money available for investment. Whatever the case, people with money and those responsible for others’ are still investing in bogus schemes at an alarming rates. Ponzi frauds and other advance fee scams are still being reported and the current flavour it seems is the boiler room threat.

Financially astute persons (i.e. those with money or investing it for others) should not be easily caught by these scams. There is a level of fraud prevention due diliegence that can be carried out that does not involve much effort but will uncover, or at least throw up some red flags, most of the bogus investment opportunities. It is no good relying on company searches in a climate where identities are so easily hijacked. Drilling down into an individual’s or organisation’s identity is essential, to uncover all of the public information available and checking or cross referencing this wherever possible. When investing several £100,000 or millions, surely it is worth checking to see if a director is who he says he is and lives at his stated registered address? For a few pounds this, and many other details, can be so easily verified.

Mark Jenner is a forensic accountant specialising in fraud investigation and fraud prevention.

According to the Federation of Small Businesses (FSB) some 20% of all crime takes place on business premises. When you think of all the theft, murder, drugs and the like, this is an awful lot of crime!

The reason of course is that businesses are the target for all forms of fraud – employee fraud, creditor fraud, supplier fraud, Internet fraud…the list can go on. You should not wait until your business becomes a victim as it inevitably will at some point, do something about it now.

Apart from the obvious security issues for your assets, you need to put together a fraud reduction strategy that will help protect your business from various types of fraud, phishing, pharming, identity theft plus hacking and virus threats to your IT systems.

Your data needs protecting also. Even apparently simple information such as your customer lists are valuable and you do not want your employees giving it to your competitors. The data can also be lost through burglary and criminal damage to your premises. Think of the effort that would be required trying to recreate this information.

Remember to vet your employees when recruiting. You want trustworthy workers who will not put your business and assets at risk. Resumes very often contain falsehoods, and at best exaggerations. Make sure you take up references, check periods of employment and question what an applicant was doing in a “gap” period. Perhaps they were doing time at Her Majesty’s pleasure for fraud! Yes fraudulent employees do commit the same crimes time and time again, moving from one complacent employer to another.

Complacency is the name of the game when it comes to fraud risk. Although it does not always pay to be overly oppressive in your anti-fraud policy and cause resentment and even fear amongst your staff, a tightly controlled work place will undoubtedly prevent the fraudster striking or at least make him think twice before having a go.

Mark Jenner is a forensic accountant and fraud expert advising companies on cost effective ways of preventing fraud.