The term Long Firm Fraud is popular with law enforcement investigators who coined the phrase several years ago when this method of fraudulent trading was at its height.

Typically based in the Midlands organised crime gangs would set up apparently bone fide companies, sometimes hijacking the identity of an existing company to obtain a legitimate trading history and therefore good credit reference – then commence trading with suppliers. 

They would build up trust with the suppliers by initially paying for deliveries but gradually ordering more and more and paying later and later.  Very often a large amount of stock builds up with very little initial trading occurring.

Eventualy the fraudsters would abandon the company.  The stock, well this was sold off cheaply at pound shops, market stalls and the like to quickly liquidate the capital.  The creditors of the abandoned company would of course be left high and dry.

This is a fraud fraught with difficulties for the investigator.  Typically run by Asian gangs based in Birmingham and nearby, the purpetrators opperated with aliases and phoenix companies.  Often tracing the activities that would spring up and dissappear overnight it seemed.

You would think that recently as credit becomes harder to obtain that this type of fraud would not be so popular.  However Long Firm Fraud and fraudulent trading in general is likely to become even more of a problem as we head for the (hopefully) recovery years of this current massive downturn in the economy.

This is because businesses will be eager to build up their trade, offering good terms and even extended credit in an attempt to expand out of the downturn.  If one thing is certain in the field of fraud it is the fact that lessons do not seem to be learned!  Unfortunately people are too trusting, too eager to believe that a deal is going to be beneficial. 

What can be done?  It is the same answer for all frauds.  The regulation of the fraudster by the police, other agencies and private enterprise must receive adequate resources and be seen to be dealing with fraud as it arises.  Too often we read of the likes of the Serious Fraud Office bringing a case to trial after years of investigation.  This is not a criticism of the SFO per se, but the burdensome judicial system within it is forced to work.  The Serious Fraud Office has had to deal with several Long Firm Frauds in the past and has had some excellent results.  However, obtaining credit without the intention of paying, i.e. fraudulent trading, is an offence that will happen time and time again in coming years.

Apologies for three short posts this moring as I am working on the format of the fraud advice blog and experiencing a few problems.

This morning I had scheduled a meeting in Birmingham with a building contractor in connection with a current investigation involving several aliases of the director and a number of phoenix companies that had been set up in succession.

I was up well before dawn at 4.00 am and had walked the dog and had some breakfast and on my way just after five.  I was well on time for my 9.00 am meeting  and had stopped a short distance before the rendezvous at a convenient watering hole to take stock of my notes when I received a call cancelling the meeting!

Fuming over a cup of coffee I have now settled down to write these posts and to start planning a rewrite of my fraud investigation website.