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Rogue traders out to pick the industry’s pockets

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When County Durham dealer Catertech revealed that it had recently been taken for £3,500 by a credit card scam, there were plenty of people in the industry that would have known exactly how it felt.

Fraud — credit card fraud particularly — is big business. Losses on UK cards in the six months between January and June this year totalled £216m, a 17% rise on the previous year. While the figure doesn’t distinguish between consumer and corporate fraud, it certainly illustrates the scale of the problem.

Kitchen equipment might not seem the sort of item to interest your average con artist, but the nature of the catering industry — with new restaurants, bars and cafes opening all the time, and suppliers dealing on a national basis — renders it a constant target for individuals or groups looking for what they perceive to be an easy target.

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In Catertech’s case, it got stung after it processed an order for microwaves and other kit over the phone only to later discover the credit card was a clone. Staff at the dealer had checked the Sheffield shop the goods were being delivered to, and understood that it was being converted into a cafe. By the time they realised the order was not legitimate, the goods had been delivered and signed for by a third party.

Catertech has since appealed against a chargeback imposed by the company which processed the card payment, but it was not successful. Instead, the payment taken from the genuine credit card holder’s account was refunded and charged to Catertech.

Understandably, news of Catertech’s plight has drawn sympathy from the distribution industry, with several dealers posting on CateringInsight.com that they, too, have fallen victim to this sort of scam or ones like it.

“This story is all too common nowadays,” wrote Simon Wratten, owner of Thames Valley Catering Equipment. “We got hit on three occasions in 2012. The police and credit card companies were not interested and the retailer loses every time. This year we stopped a £4,000 fraud and informed the credit card company that a stolen card was being used and they had no interest in cancelling the card. We now try and work by BACs whenever possible.”

Derek Stevens, director at Cheshire-based CaterTrader, agrees that scams involving stolen or copied credit cards happen far too frequently. He wrote: “We had a case some time ago with a stolen Jersey Bank cheque. Fortunately no goods were ever sent abroad, but our bank balance looked good for a week until the bank clawed it back.”

Abdul Rokib, MD of Coffee Omega, added: “These scams are very sophisticated and involve a team of several people. They auto their emails to everyone who has an email on their site. All fraudulent emails will look fishy and sound too good to be true.”

The use of stolen cards to purchase equipment before the seller realises is one of the most common types of fraud. Chris Stoker, owner of Inspire Commercial Kitchens, encountered a similar scam to the one that fooled Catertech when working for a different company a few years ago.

In his case, the buyer told the company that the delivery address was being converted into a cafe and then proceeded to order goods worth £8,000 over a two-month period. Card details were checked and verified by the card payment provider, but after three months it was hit with a chargeback.

“I deliberately didn’t contact the person ordering the goods to make him aware that I knew what had happened — subsequently he rang to order more goods which I said I would process,” wrote Stoker. “I set up the fake delivery date and address where goods would be delivered, informed police and they were not interested.”

Incidentally, Catertech, too, said it alerted police to its incident but was told that they did not have the resources to properly investigate. Stoker, meanwhile, says that now he runs his own business, he refuses to take any card payments due to the lack of back-up from the companies that provide the card payment services.

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Other distributors also say they now endeavour to build in as much security to the credit card processing procedure as possible. Lyndon Moorby, director of YCE Catering Equipment, notes: “We have a credit limit in place for ‘over the phone’ sales, and where possible we check people out beforehand. We don’t release any goods until the payment has gone through and been approved, but that wouldn’t help if we’d been caught out like the guys at Catertech.”

Akro Catering Equipment in Suffolk has tightened its security procedures for credit card transactions by introducing software that regulates online orders. It flags up any anomolies in a customer’s details, such as a different billing and delivery address, or the use of a Hotmail account, so that a staff member can verify the authenticity of the order before approving it.

Akro’s Claire Batt comments: “For anything we are not 100% sure about and higher value orders, we contact the customer and advise them to make a direct bank transfer into our account. We do take orders over the phone — these are scrutinised and again the same applies: high value orders must be a direct bank transfer. Heavy duty equipment, of course, and Kitchenaid mixers, were a popular line amongst the fraudsters. But we have also had scammers who put in a small order to see if they can get away with putting in a larger order in the future.”

Predictably there are calls from suppliers and distributors for some form of central ‘fraud list’ where dealers can publish the names, addresses and details of any individuals or companies known to be posing as legitimate buyers, in order to help others avoid being stung. CEDA members already benefit from an ‘early warning system’, with the organisation alerting dealers by email to any new scams or tactics they become aware of.

Wratten at Thames Valley Catering Equipment notes that one of the newest scams to emerge is one where an individual attempts to make a payment by cheque and then claims they have overpaid by mistake and requests for the balance to be paid back straight away before the cheque has cleared. The cheque is then cancelled as the bank finds it was stolen. He says a company tried this on Thames Valley last month and rang at least six or seven times to try and force it to pay out early.

Another scam doing the rounds involves false emails from the ‘Inland Revenue’ or ‘Tax Office’ informing the company owner of refund or credit. The email contains an attachment which the recipient is invited to open, but it actually releases a virus which detects every key stroke and website they visit.

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One worrying trend for the industry is that scammers are going to more extreme lengths to pull off their crimes. Mark Hutchings, boss of Cater-Bake, says it recently had a company ring up purporting to be one from of its known dealer customers. The caller got the price and placed an order via email, using an address that had the dealer’s name in it.

However, when Hutchings was told about the order by his staff and didn’t recognise the individual’s name he knew something was amiss. “When I found out the person hadn’t asked for extra discount when taking a few items at once I got suspicious and when they told me he was sending a van to collect from our warehouse instead of using our free delivery service I knew there was something rotten. So I phoned the dealer and sure enough the order was nothing to do with them.”

Vigilence, it would seem, is the name of the game when it comes to avoiding scams. Graham Batty, boss of Grampian Catering Equipment, says his firm has had quite a few emails from what it believes is fraudsters trying it on by saying they want to purchase products they have seen on its website.

When all they ask for is the best price and whether the company accepts credit cards, his approach is always the same: “Every time we are asked for something in a hurry and they want to pay by card we ignore it.”

Invoice fraud: A growing threat

Earlier this year, Financial Fraud Action UK issued a warning to businesses about the danger posed by the rapid spread of fake invoices. Evidence compiled by the National Fraud Intelligence Bureau suggests this simple but effective fraud is on a “steep rise”.

What is invoice fraud?

Invoice fraud is where a genuine invoice from a supplier is intercepted by fraudsters who then change the bank details on the invoice to an account under their control. The fraud is only discovered when the genuine supplier contacts the business regarding non-payment.

A variation on the scam is when fraudsters are aware of existing relationships between businesses and suppliers with regular payments being made and they contact the business, under the guise of the trusted supplier to inform them of a change of bank details. The business finance team will often take this information in good faith and change the details, thus paying money directly to the fraudsters.

How can you spot it?

Counterfeit invoices sometimes don’t stand up to scrutiny; by comparing a counterfeit invoice with a genuine invoice, you’d be able to notice the differences, such as a blurred or less sharp logo on the false invoice. In some cases, where there have previously been no payee bank details on the invoice, the fraudsters have typed their account number onto a genuine invoice, to get the payment.

Look out for different contact numbers and e-mail addresses for the company as these may differ to those recorded on previous correspondence. The contact e-mail address may only include a minor amendment giving the impression that it is correct.

How can you reduce this risk?

– Always confirm change of bank account requests with the company making the change. Use the contact details you have on file rather than those that are provided on the letter requesting the change.

– Consider setting up designated single points of contact with companies to whom you make regular payments.

– Consider sending out an email to the company invoicing you using the contact details that you have on file, letting them know when you’ve paid them and the bank details that you’ve credited.

– For large payments, think about setting up a meeting with the company involved to satisfy yourself that the payment will be sent to the correct bank account.

Fraud facts (Jan-Jun 2013)

£216m
Total fraud losses on UK cards

17%
Increase in losses versus same period last year

£308m
Equivalent period in 2008 when fraud was at its peak

£142m
Fraud on purchases made by cards online and over the phone

23%*
Rise in fraud online and over the phone.

* This figure needs to be seen in the context of the increase in card spending, as losses have reduced 21% and 22% respectively due to improved security processes.

Source: Financial Fraud Action UK

Tags : businesscatering equipmentdealersDistributorsfraudscam
Andrew Seymour

The author Andrew Seymour

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