Policy & Compliance
include an attempt to assess whether it intends to pay. What can you do to limit damage if the due diligence check fails to spot a fraud? One thing that stood out in most of the cases highlighted, was that in too many instances, as one victim has told BIFA: “We were too busy doing the Customs clearance to keep an eye on the credit.” In other words, credit limits were either too generous or overlooked in a busy operational department. Two cases highlighted how good credit control policies limited damage. In one case the Member had agreed with the importer that it would expect payment of the first shipment handled before undertaking further work – when this was not forthcoming it simply refused to clear the next consignment until payment was received. The importer disappeared leaving it out of pocket, but for a manageable sum of money. Given the current issues, we have been advised that our old mantra of ‘know your customer’ has never been more relevant.
forwarders need to start asking more questions when being approached to provide their services. As one expert credit controller put it: “Presume the worst until the potential client has passed all the checks.” We have been advised never to trust data from any one source until you have examined and checked it out for yourself. The data at Companies House, although improving, is still flawed. Credit reference agencies provide a useful service but, in all probability, there is too much reliance placed on them and their outputs. They will collect information on companies, but they do not always spot bogus accounts. The only way to detect short firm fraud is for Members to actually inspect the accounts and other data filed at Companies House and ensure that they fully
understand how to spot potential points of concern which include, but are not limited to: • Changes of company ownership/directorships; • Change of activity – one company attracting attention at the moment was previously a cleaning contractor. Now it imports fresh fruit; • A sudden increase in profitability from one year to the next; • Too prompt a history of filing accounts at Companies House - no company files their accounts only 15 days after their end of financial year for instance. This is not an exhaustive list but provides some indicators of what to look out for when considering whether to do business with a potential customer. Due diligence checks used to be made to establish the credit worthiness, etc, of a customer; nowadays they
“ In all cases the fraudsters ran up large bills and then simply disappeared without settling their account
BIFA Good Practice Toolbox For further information BIFA
members should refer to the BIFA Good Practice Guide - A Guide to Due Diligence regarding credit application Procedures available to download from: https://bifa.org/information- guidance/technical-information/ good-practice-toolbox-bifa/
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