Businesses across the region are being advised to exercise extreme caution after the emergence of a new type of fraud.
This could include logging on to Companies House and using Creditsafe, together with internet and review searches, to verify businesses before committing to buy or supply goods.
Ben Gilhespy, EMN director of operations, said: “Recently we have been made aware of a number of cases of fraud and instances where members have fallen foul of suppliers who believed they could deliver products or services but ultimately could not.
“There’s a difference between out and out fraudsters who have spotted a loophole and are looking to exploit the current economic climate and those companies who are desperately trying to be agile and win new customers but ultimately cannot see it through.
“The emergence of these cases is a cause for serious concern, and we advise businesses across the North East to ensure they carry out the usual checks. No matter how much you desire new customers please ensure you don’t remove a part of your due diligence process as you bring them on board.
“There are cases of fraudsters posing as legitimate businesses looking for suppliers, resulting in businesses delivering goods for which they will never get paid. Likewise, other companies have lost suppliers, and in the rush to find new ones these basic checks may be missed.”
The EMN first became aware of the issue when it was raised by one of their members, Dyer Engineering Group.
“The key message from this is to be vigilant and to make sure that all the members of your team understand the risks,” says Richard Bradley, Dyer Engineering Group FD.
“Review all processes regarding setting up with new customers and suppliers and ensure that they are as rigorous as they can possibly be. You’ve worked hard to get your business to this point, don’t let some fraudster take it away from you.”
Susan Howe, partner and head of dispute resolution and member of the North East Fraud Forum, added: “We are all having to adapt the way we work and unfortunately some people will try to exploit the situation.
“Given the unprecedented stresses businesses are operating under at the moment, it is tempting to forego some of the usual checks in favour of onboarding suppliers to meet demand or taking new customers at face value to protect cashflow and adapt to the fast-changing marketplace.
“However, businesses could be leaving themselves open to fraud if the necessary checks aren’t made and we must take care to ensure the decisions we are taking now don’t come back to haunt us in the future.”
“There are basic, quick and easy checks that can be done to mitigate the risk of fraud and courts are still operating for emergency injunctions. If a genuine supplier has failed to deliver, contractual remedies can also be pursued.
“Businesses across all sectors are at risk, particularly those in the manufacturing sector, so it’s more important now than ever for businesses to be increasingly vigilant and diligent as we work hard to recover from the impact of COVID-19.”