How False Credit Checks Scam Companies out of Millions

19 April 2021

An investigation by Carte Blanche in February 2021 revealed how insufficient credit checks led to South African businesses being scammed out of millions of Rands.

Credit check companies declared fraudulent businesses legitimate, and criminals with no lawful background were granted hundreds of thousands of Rands in credit. Once the goods were delivered, the fraudsters vanished without a trace and the suppliers were left out of pocket.


How does the Scam Work?

Criminals will begin by hijacking the identity of a legitimate company. Using the stolen information, fake websites, letterheads and custom emails are created. Some criminals will even stretch the fraudulent persona to renting upmarket offices – all in the name of impersonating a real, legitimate company.

Once they have established their fake company, the fraudsters will send out credit applications to dozens of suppliers – for example, applying to buy five-hundred thousand Rands worth of stock on a three-month loan. Suppliers of goods that can easily be resold are always targeted, such as building materials or, in the time of Covid-19, suppliers of PPE. The total value of these credit applications can total in the tens of millions of Rands.

If the suppliers grant the requested credit, the scammers will ask for the stock to be delivered to a rented warehouse. Once the stock is delivered, the scammers will instantly ship it away and disappear without a trace, leaving those who were scammed completely out of pocket and with no comeback.

Although the financial losses suffered by the suppliers are devastating, there’s even further damage done to the reputation of these legitimate businesses whose reputations are dragged through the mud. Criminal charges can be laid for activity business owners were completely unaware of occurring.

Ultimately, the buck stops with the company contracted to carry out a credit check on the fraudulent company.


The Failings of Credit Checkers


Credit and identity checks are designed to protect against the threat of fraud. However, the businesses contracted to perform them are not always thoroughly comprehensive. Credit checks that only skim the most superficial elements of a business’s identity will oftentimes be fooled by the scammers. The credit check company will report the all clear and the supplier trusting this report will approve the credit application.

The failings of credit check companies to conduct thorough and comprehensive credit and identity checks is an oversight that can cost their trusting clients dearly.


How to Properly Conduct Credit and Identity Checks

Fraudsters will go to extreme lengths to appear legitimate. Upmarket offices in exclusive suburbs staffed by professional secretaries are common, and those tasked with authenticating a business may be enticed by these displays of wealth and professionalism. 

However, because these fraudulent companies are set up temporarily and are designed to disintegrate as soon as the scams are successful, their genuine appearance will only run skin deep.

Physical addresses, phone numbers, email addresses and other such traceable information will all exist on an extremely short-term basis that seldom exceeds three months.

Below are crucial tips and advice on how to conduct a full and comprehensive due diligence investigation. This evaluates corporate identity, the identities of company employees, fool proof credit checks and information on leased properties.


Credit Checks

The most crucial part of a due diligence investigation is a thorough credit check. This is conducted to verify an individual or business’s credit worthiness.

For instances, credit applications require a full credit report, which is justified. This returns an individual’s full credit profile and is the most failsafe way of ensuring a reliable credit score. Risk factors, outstanding balances and months in arrears will be on display.


Property Checks

Elaborate fraud schemes will often try to fool credit rating agencies and evaluators by taking out short term rentals on flashy corporate offices in upmarket areas.

However, because these fraudulent businesses are set up on a short-term basis and will disintegrate as soon as they have carried out their scam, tactics such as these are shallow and detectable. Tools such as a Title Deed lookup will return all properties linked to an ID number and show how long it has been registered for. If a property has only been leased for a couple of months, it should instantly be a red flag.


Personal Identity Checks

Identity theft is common practice for fraudsters engaging in short term crime related to credit and loans.

Although scammers will hijack the identity of companies, they will also impersonate the identities of company employees. This may lead suppliers to believe they are dealing with a legitimate company manager, while in reality they are dealing with an imposter.

It is therefore essential to conduct a full identity check on pertinent individuals to ensure that their name, face and other personal details match those linked to the ID number they provide.

ThisIsMe offers numerous services to validate South African ID and passport documents. These can be pared with an ID number search that returns all contact, address and employment history.


How We Can Help

This story forms part of the wider narrative of fraud, insecurity and mistrust that scars the South African economy.

At ThisIsMe, we work to put trust in transactions. We provide all of the aforementioned services, as well as dozens of others. Visit our website to find out how we can ensure your transactional security through comprehensive identity and credit checks.

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