How To Spot Fraud Companies (A First Person Account)

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Here’s an important statistic for business owners: every year, the typical company loses 5% of their revenue to fraud. That’s a median of $145,000 per company, and $5.7 trillion a year globally.

The Association of Certified Fraud Examiners, who conducted the research, found that in particular companies of 100 employees or less were especially susceptible to fraud, suffering losses 7% above average – largely due to less comprehensive anti-fraud policies and employee training.

We can attest to the problem firsthand. As a smaller company in financial services, we are often targeted by fraud companies looking to deceive us. However, as we’ve developed an internal system to spot fakes, we decided to publish one such experience we had recently, as a cautionary tale to other small companies – and to provide tips on how to avoid fraud themselves.

What Happened to Us

Two months ago we got a signup from UnitedWholeSale.Net, interested in generating expense cards for its site on competitor research. It had a professional looking website, including a “2018 Top Company as seen in Quirk’s Magazine” badge at the bottom. However, when one of the members of our sales team searched through Quirk Magazine, they quick realized that United Whole Sale was in fact, not listed.

Upon some further research, we stumbled upon a company, Intellishop, with an identical website and product. You can observe the similarities of the homepage below for yourself:

fake

real

As you can see the site on the top (which was a fake) is virtually identical to the site on the bottom, which belongs to a legitimate company. We realized we were dealing with a fraud.

As we are a company that deals with ACH, we are a prime target for fraud. This is because when payments are processed, there is a 1-2 business days delay between when we transfer a deposit to a company, and when their ACH reimburses our account. As such, Emburse – along with many other companies in the finance and payments space – is a targeted by scammers, hoping to receive a floated transfer from us, before quickly cancelling their own. As such Emburse has to be very careful in screening which applications to approve.

As such we’ve developed a pretty strong “fraud radar”. In this case we quickly reported the company to the Better Business Bureau and Federal Trade Commission and moved on. However, the steps we follow to spot fakes weren’t specific to United Whole Sale – we use them all the time. Here’s our process:

First Line of Defense: Is The Website Legit?

It seems counterintuitive, but many scammers actually purposefully create bad sites that are noticeably fake on inspection.

The reason? It makes weeding out the less gullible people much easier. Many times fraud sites will have broken links, misspelled words and bad grammar, or there will be pages with missing content and words.

Take for instance this text under the United Whole Sale’s “Mystery Shopper HQ” page:

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Notice how the full “United wholesale Inc” name isn’t even capitalized, nor “Inc.” properly punctuated. Further inspection of the page shows no images are present and the page sublinks are clunky and don’t behave as expected. At the bottom of the page you can notice how a basic page link doesn’t even have the right spacing between its words.

A quick eye test should take less than 5 minutes, and if you’ve been on hundreds of company sites fakes should immediately raise red flags. However, another quick way to find copying or “spoofing” is to use the site CopyScape.com. While traditionally used to detect plagiarism in journalism, the site is also excellent for detecting sites that are duplicating content from legit companies. Pick a URL with at least 200 words (a homepage is okay if there’s enough text), and type the URL into CopyScape. If the results turn up pages with more than an 80% match (especially on multiple pages from the same URL), you can be confident you’re dealing with a fake. Diligence is your first and best defense mechanism.

Second Line: Check Social Proof

How many companies can you think of without a Facebook page? Without a Twitter or Linkedin? While fake companies can create fake social pages, it’s particularly hard to create fake employees, so we recommend starting with Linkedin to see if a company has employees (at least 5 typically) and with profiles you can look at.

Third Line: Contact The Company

Even if a company has a good digital fake, it will still be difficult for them to fake a full fledged real company (and again, they typically don’t want to). Look for a contact page – if they don’t have one, move on from the company.

If they do, look for a number you can call or an address you can search on google. In most cases there is no number to call, and addresses come back to dilapidated warehouses or random areas. This line of defense is particularly useful for very small companies or mom and pop shops, as these companies sometimes don’t use Linkedin, or aren’t particularly adept at creating websites. However these sites are looking for your business and so they always have some sort of contact phone number. They want it to make it as easy as possible for you to reach them, where as a scammer wants the opposite.

Final Step: Use Third Party Verification

If a company doesn’t pass the first three steps, it’s safe to say they’re not legit (or even if they are, you likely don’t want them for your business).

However, if you want a system that has a little more rigor – or automation – you can always turn to third party sites to verify company information.

Here’s a few good lookup services:

  • LexisNexus: LexisNexus is one of the most trusted names when it comes to public record databases. Used by everyone from lawyers to consultants, LexusNexus has a searchable record of over 30,000 news and business sources. However, they are also a paid service, and it will likely cost your business some thousands to purchase a license.
  • Phishtank: PhishTank is a crowdsourced platform of sites known to be using “phishing” scams to get your information. However these typically target individuals and not businesses, and won’t be a primary business search portal.
  • Better Business Bureau: This won’t be as easy a search, as you need to know the company location, but the BBB is the authority on known scams and frauds, particularly ones that are sophisticated with active phone lines and well designed sites. If a company has passed other checks but continues to rub you the wrong way, it’s definitely worth checking with the Bureau on what they know.

With these lines of defense, it’s a pretty hard for a fraud company to sneak past your radar. Remember – a lot of this boils down to common sense and attention to detail. And if you ever get a red flag about a company, feel free to refer back to this page for a checklist of items to address.

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