When it comes to ensuring the legitimacy of all credit applications, there’s no such thing as being too careful.
Cinque‘s partners Allianz Trade have recently sounded the alarm on a significant escalation in transactions involving fraudulent debtors – and, as a valued client, there are two things we need you to be aware of here:
- Fraudulent transactions are not covered by standard credit insurance policies.
- Credit insurance policies typically stipulate your responsibilities in guarding against the inherent risks of extending credit.
What you should do
#1 Treat every transaction as if it was uninsured.
- Use a continuous, proactive process to identify risks and evaluate their potential for loss, and incorporate Knowing Your Customer (KYC) into your credit assessment.
- Make sure you are familiar with the regulations and laws governing your business activities in a specific country – and that you’re fully compliant. (You’ll need to be, if litigation becomes necessary, so consider seeking legal advice if you’re unsure.)
#2 Take nothing at face value.
- Ensure the application is from an official, legitimate source.
- Call the customer to verify that the order is valid and comes from authorised personnel.
- Visit the applicant’s premises, to confirm its existence and legitimacy.
- Obtain company registration and VAT documents.
- Cross-reference supporting documents and debtor information on the credit application form with independently sourced credit bureau reports.
#3 Heed red flags.
- Is the applicant’s industry unrelated to yours?
- Is a new client ordering large volumes, yet reticent to pay a large deposit in good faith?
- Is the applicant using WhatsApp instead of issuing formal written orders and communication?
- Is the applicant‘s email address gmail or yahoo?
- Are the contact details for the trade references those of individuals, and are they cellphone numbers, instead of landline numbers?
- Is the address of the director the same as the company?
#4 Muscle up.
- Quanta5 is the ideal business tool to assist in streamlining your credit management processes and ensuring that consistent measures are taken to try to prevent fraud.
- Our Fraud Check product will provide you with an additional layer of comfort, with our highly skilled analysts checking, evaluating and identifying inconsistencies that may relate to fraud.
If you would like more information on our Fraud Check product, please contact your Cinque advisor or info@quanta5.co.za.
