Recently there has been a significant uptick in fraudulent email traffic out of China where scammers issue fake invoices that trick legitimate businesses into paying.
This scam is hitting savvy, large, internationally-experienced companies, including Risk International clients. We are currently working on over $1.5 million in claims for this activity.
How the Invoice Fraud Scam Works
This scam is usually employed against United States companies that have been making purchases from Chinese companies.
In the normal course of business, the United States companies have been making payments pursuant to purchase orders (POs) that specify the payee’s company bank account to which payment should be made. Suddenly, the Chinese company sends an email to the United States company requesting funds for outstanding POs to be made to a new bank account.
While it is always possible that the Chinese company has changed its bank account, you should conduct thorough due diligence before making payment. Over the last year this scam became even more sophisticated when computer hackers started hacking into Chinese companies’ computers and sending out actual invoices that purported to be on behalf of the Chinese company.
Our clients received emails with PROPER invoices and a message saying that the company was consolidating its payment processing in connection with a change in bank account information. Later legal demands were made for outstanding payment.
Here are a number of ways you can avoid this happening to your company.
7 Ways to Uncover Invoice Fraud
1. Know that Chinese companies tend to be very loyal to their banks and rarely switch.
2. Conduct thorough due diligence when granting any request to make a change in the payment bank.
3. Be suspicious if the name on the bank account is not the same as the name of the Chinese company you are doing business with. If the name is even slightly different, do not pay.
4. If the new bank account is in a different city or in a different country (often it is for Hong Kong), do not pay.
5. If the amount of the invoice is one penny off, do not pay.
6. Do not even consider following such a request unless the request is made in writing on a revised purchase order stamped with the company seal. Even in that case, it is important to contact someone you know in the company with supervisory authority to ensure that the request is valid.
7. Email requests to make a change should be ignored, but the request should be forwarded to your trusted Chinese company contact for an explanation.