Protect yourself from Scammers – Part 3 – Identity Theft
Up next in the fraud prevention series (yes, it’s been a bit of a time lapse) is Part 3 – Identity theft – business and personal. This one stems from actual events at my company and with some of my employees directly. This one in particular is far more difficult to prevent and stopping it once it’s begun will prove harder yet.
In our situation, a group of scammers has attempted to impersonate my company and one of my people in particular. By using his name and the name of our company under a similar internet domain, some hosted toll free numbers and free email (gmail) they began their scam.
In this particular case the following events transpired.
They registered a similar domain (acmecorp.BIZ) instead of .COM
An email address was created to impersonate our company, but not on that domain, rather on a gmail account (AcmeEmployee@Gmail.com)
A toll free number was setup and forwarded to a cell phone or land line of the scammers. The number was answered as my employees name and my company name.
Purchase orders were created using our company name, employee name and the false email/phone details.
Credit applications were submitted to vendors using our company name, bank name, bank account numbers, trade references and everything else about our company except for the contact information which was the toll free number and gmail account.
The purchase orders were sent to manufacturers and distributors for all kinds of things from electronics to furniture – all to be shipped to some freight forwarder in Florida.
This one was and continues to prove difficult to slow down and/or stop. Unfortunately it falls on the purchase order recipient to use good judgment and fraud control measures of their own. There is no way for us to alert all manufacturers and distributors of fraudulent purchase orders prior to them calling us and following up on the credit application(s).
How do you protect yourself against this type of scam?
It is much harder than others where you can simply change your bank account number or get a new credit card. Proactively the only things we could have done would be to register every domain remotely close to ours and include .biz, .info, .org, .us, .mobi, etc.
Re-actively we alerted the banks to the situation, alerted D&B to make note on our credit file, alerted other credit bureaus to note our file, engaged the local police, FBI and Secret Service to investigate and contacted larger distributors to let them know of the events.
As a distributor and reseller myself, these sorts of oddities (gmail account and non-.com domains) are big red flags and automatically trigger some deeper digging, but for others not familiar with this sort of activity or hungry to close the deal without looking at the details this can spell a huge financial loss.
Protect yourself from Scammers – Part 2 – Credit Card Fraud
Following along in the fraud prevention series is Part 2 – Credit Card Fraud. If you have been involved in online retail and/or international telesales, this topic is not likely a new one. Nonetheless and especially for those looking to get involved in online retail, this is what we found and how we prevent it each and every day.
Part 2 – Credit Card Fraud: When I say each and every day, it is no exaggeration. At VoIP Supply, our customer-base is global and our store is open 24/7 for those in need of VoIP hardware and IP Camera equipment. There are sections of the globe known for fraudulent activity, but it is not limited to foreign soil. To keep this shorter than average, below are a few techniques used and some of the steps you absolutely must take in order to protect yourself.
Things to look for: Some general techniques used to fool online retailers and telesales organizations.
Late day and particularly Friday afternoon orders that must be delivered the next day or by Express shipment. If someone calls at 4:50 pm on Friday and needs 50 Polycom IP Phones delivered the following day, it raises a flag.
Shipping Address variations: If the shipping address is different than the billing address it should be cause to look further. Though often perfectly fine, if someone with a billing address in Nebraska is shipping to Miami, I’d want to look deeper.
Name Variations: If the name on the card is different than the name being shipped to, this could also be fine but can indicate potential fraud activity.
How to protect yourself: There are some basic rules to follow, all of the time.
Verify with the card issuing bank. This is an absolute must if a red flag is up. Get the phone number from the back of the card and make sure that the bank verifies that the card is not stolen, that the names are authorized and that the shipping address is on file as an alternate address for the credit card. All credit card companies allow you to authorize multiple shipping addresses. If you “customer” tells you otherwise, walk away and protect yourself.
Call the company: If Joe Smith from Acme Corp in Lincoln NE wants to ship to Fred Richards in Miami Florida, google Acme Corp and call their phone number to see if Joe Smith works there and truly does want the goods shipped to Miami. Don’t rely on phone numbers provided by suspected fraudsters.
Look up the shipping address. If you google the address to be shipped to and you find that there is a freight forwarder doing business at that address, follow through with items 1 and 2 above.
Common sense. Run the card through your merchant processor as you would any other card and make sure to get the valid name, address and security code with all of them matching. If the code doesn’t match, the zip code if wrong or the name fails, you may have saved yourself some pain down the road.
It is pretty easy to protect yourself and far less expensive than eating a total loss. There are companies out there that will provide these screening services for you if you don’t have time to do them yourself. Be careful and look out for your business as most other people aren’t going to.
Protect yourself from Scammers – Part 1 – Check Fraud
This post contains a few examples written from personal experience where I / we were either a victim or very nearly taken advantage of. There are ways to protect yourself but not all are obvious and, without taking the appropriate measures, you may well find yourself in a similar situation. In this series I’ll write about check fraud, credit card fraud, identity theft, international transactions and other methods that dishonest people will attempt to take advantage of you and your business.
Part 1 – Fake checks: Over the past eight years that VoIP Supply has been dominating the online retail marketplace for new and used Voice over IP hardware, we have had several waves of fake checks totaling well into the high six figures and possibly over the seven figure mark. People have created and delivered hundreds/thousands of checks with our account numbers, company name and address to victimized individuals and businesses around the world. Someone sold their Harley Davidson on eBay in exchange for one of these checks, delivered the bike and a few days later found out the check for $10,000 was not legit. Companies have sold goods to people impersonating VoIP Supply, delivered them COD and received a fake check in return. Those are just a couple of examples, there are hundreds more…
How they did it: First things first, they got our checking account number. At VoIP Supply and IP Camera Supply, we have a lot of customers that choose to pay by wire transfer and we generate plenty of quotes with our wire transfer instructions on it. These instructions contain our account number and our bank’s routing number. In addition to that, every check we cut and send to vendors, partners, customers and affiliates (just like your checks) contains the same information. Once you have this information, all you (they) need to do is march on into and office supplies store, buy some blank checks and start printing. It’s that simple and not much of a secret.
How to protect yourself: Here are some ways we’ve done it.
Setup a separate checking account for incoming wires. Your bank can setup an account that does not permit checks to be cashed against it and use it in a one-way manner for deposits only. Once your incoming wire arrives, the bank can then transfer the funds to your primary account(s).
Talk to your bank about check fraud protection programs they may have. We use a program that requires all checks that we generate to be registered with the bank prior to them being eligible for cashing or deposits. We provide the bank with a list of check numbers, amounts and payees and they will only cash checks that appear on that list. It may be an inconvenience from time to time, but well worth it for both us and for the bank.
There are several well known brands in the check printing industry, companies like McBee and Deluxe. If you can, reach out to them and provide your account number if they have a program to register accounts not eligible for printing. They have their own fraud prevention process as well.
If and when you see your first check like this or find yourself in this situation, brace yourself, it will likely be just the start. Don’t wait for them to begin piling in, take action right away. Let your bank know what’s going on, call the police and file a report and begin working on steps 1-3 above. If the tally continues to grow, keep the local police involved, they will escalate it to a federal enforcement group once past a certain dollar figure or volume of transactions.
In our case, while this fake check issue continues to present itself from time to time, it has been put in the hands of the Secret Service and several of these people have been tracked down and prosecuted. Because they were fake checks and the bank caught it, we were not out any funds. Nonetheless, individuals and businesses were victimized and they should be protected by your proactive fraud control measures. Be smart, plan ahead.
Credit card scams – See part 2 – This one cost us a long time ago. We learned the hard way so you don’t have to.
Identity theft (business and person) – See part 3 – This is a growing threat for individuals and businesses, don’t ignore it, prevent it.
International – See part 4 – If you service a global customer base as we do, be cautious and don’t be afraid to walk away when it seems to good to be true.
Internal affairs – See part 5 – Dishonest people are everywhere, protect yourself from being victimized from inside your own walls.
A few very important and unknown or overlooked aspects of business…
This post comes about as I was having dinner last evening with a distributor, partner and occasionally a competitor – all one in the same. It was so interesting and even amusing to exchange stories of similar experiences as we are in the same industry with a close business model, of roughly the same age and size. Some of these topics should serve as warnings and things to prepare for if you plan on starting a business, particularly an online business catering to more than just a local customer base.
Checking account fraud prevention. I can’t imagine it will be too long (certainly shouldn’t be) before actual printed checks become a thing of the past. In the meantime, you need to be prepared and protect yourself from fraud. While this may not pertain to all businesses, the crack in the armor stems from extending wire transfer as a means of payment for customers though that isn’t an exclusive source for this fraud tactic. Maybe they prepare customers now, but when I got started, no one at the bank every had this conversation with me until it was too late and the police, FBI and Secret Service had to get involved.
The tip: Setup an account at your bank that is Deposit Only and use that account if you are going to accept a wire transfer. Have a separate operating account to write your checks from.
The other tip: Use a service called Positive Pay which requires you to be more proactive in working with your bank, but prevents any check from clearing your account if you have not previously informed the bank of the payee, the check number and the amount.
The reason: Once someone has your company name, address, checking account and bank routing number, they have enough information to print or order blank checks that draw from your checking account. This happened to me as well as my friend that I was dining with last evening. Prior to us using the above two tips, we had a couple of sprees where hundreds, perhaps thousands of checks were written using our account number and distributed all over the place. We had people calling daily who had sold their Harley, their car, their guitar and even their time and expertise in exchange for a fraudulent check written and drawn on our account. Unfortunately for the victims, the sellers of goods and services, these bad checks were rejected at the bank but usually not before they had been scammed out of their goods.
Credit card fraud control and prevention. I certainly don’t need to explain what this is or even the multitude of angles people choose to execute their fraudulent activities, but there are a couple of definitive ways to protect yourself and they work regardless of tactic chosen by the thief. It would have been nice to have been warned about this back in 2004, before it cost me more than $100k.
If you are shipping physical goods, make sure you are shipping to the billing address or have your customer call and list an alternate shipping address on their card with the card issuing bank.
Make sure that you get the phone number off of the back of the credit card and the name of the bank that issued the credit card. It is your responsibility to call that bank and make sure the card is valid as is the shipping address. Using credit card processing address verification is a good start, but it is not good enough to protect yourself.
Look out for telltale signs of fraud. One we see often is customers calling late on a Friday that need the product delivered the next morning. Price is no object to them, nor the expense of Saturday delivery. Most people can wait until Monday, you’d be wise (usually) to drag your feet and process the order the following week or insist on a wire transfer vs. a credit card.
Asset and operations surveillance and monitoring. This one is pretty simple and straightforward. You’ve built your business and despite the perceived big brother effect that comes along with cameras in the work place, if you have expensive goods that someone might want to steal, put them under surveillance or you may as well leave your door unlocked. It’s also a good idea to monitor the outside of your business and not just the inside as a ski mask might hide the face, but it doesn’t hide a license plate.
Planning near and long term. So you built your business and things are booming right along. You have a business plan but are bogged down with day to day activities and just keeping things afloat. Planning your current activities and projects is critical to getting things done and working efficiently, but don’t put your head in the sand for too long. You need to make sure that you take some time to get away and revisit or revise your long term goals. It is easy to ignore when scrambling to make ends meet, grow the business, keep customers happy and try to have some sort of life on top of it. Plan for the long term as if all of your customers are going away and your marketplace is drying up. What would you do if what you did or sold suddenly became obsolete? Find some other baskets and plan to move your eggs around from time to time. I’m not suggesting you stop what you are doing now, just that your eyes need to be open and you shouldn’t assume anything.