CANADIAN
COMMERCIAL
FRAUD
PROTECTING YOURSELF
Webmaster's Note: For
more information regarding
this report, please contact
Gina Barile, Commercial
Assistant, U.S. Commercial
Service Montreal, at tel:
514-908-3650, fax:
514-398-0711, e-mail: gina.barile@mail.doc.gov.
SUMMARY
While commercial fraud is a
tiny part of the $1.4 billion
daily U.S.-Canada trade in
goods and services,
nonetheless some U.S.
exporters to Quebec companies
have been victimized in recent
months. This report is to
inform U.S. companies of the
problem, describe some of the
questionable actions U.S.
exporters should watch out
for, and suggest how a U.S.
company can best protect
itself.
By implementing a solid
credit and collection policy
as well as verifying the
information submitted by
potential business partners,
U.S. companies can protect
themselves from being victims
of fraud and suffering huge
monetary losses. In most cases
of fraud, money and goods are
never recovered.
The U.S. Commercial Service
also offers a wide range of
services that promote U.S.
exports and assist U.S.
companies find reputable
business partners. CS Montreal
encourages U.S. suppliers of
goods and services to contact
us when contemplating doing
business with potential
partners in Quebec or if they
believe they are victims of a
commercial fraud in Quebec. We
will do our utmost to assist
in preventing or resolving a
problem.
RECENT CASES OF PROBABLE
COMMERCIAL FRAUD INVOLVING
U.S. EXPORTERS TO QUEBEC
The two-way trade in goods
and services between the
United States and Canada
exceeds US$1.4 billion a day.
The province of Quebec does
more business with the U.S.
than with the rest of Canada.
In 2001, Quebec imported over
CDN$21 billion worth of goods
from the United States. The
majority of Canadian importers
and customers are law abiding.
They have the capability and
the disposition to pay their
bills to their U.S. suppliers.
However, through the reporting
of substantial monetary losses
by U.S. suppliers, the
Commercial Service in Montreal
(CS Montreal) has become aware
of a few incidences of fraud
being perpetrated in the
Montreal area. Most of these
scams involve the computer
parts industry.
Case 1:
A local company contacted a
U.S. supplier of PC's and
distributor of components to
place an order. The U.S.
company asked for a Dun &
Bradstreet (D&B) report as
well as trade and bank
references. The local company
-- not D&B -- faxed what
appeared to be a D& B
report and a list of three
references. The American
supplier faxed the credit
information forms to the
references provided. Needless
to say, the D&B report
showed the company in
excellent financial shape and
the trade references completed
the forms indicating that
their business relationship
with the local company was
more than perfect. The U.S.
company shipped the goods on
open account. The local
company did not make payment.
Repeated calls for payment
were ignored.
CS Montreal's inquiries
into this trade complaint
revealed that the D&B
report had been altered by the
local company to reflect an
excellent company profile. Of
the three references, the bank
reference had no address
information, and the title of
the person who completed the
credit information was listed
as "greeter". The
other two business references
were bogus. Their fax numbers,
when dialed, were forwarded
back to the same local company
that had placed the order.
This local company set up
shop, ordered goods from
mostly U.S. suppliers, paid
for some, ordered more, did
not pay for the second order,
and then sold the goods to
third parties. When the
demands for payment increased,
they declared bankruptcy.
Case 2:
A local company contacted a
U.S. supplier of card badging
systems and components and
ordered card printers capable
of generating 100,000 cards.
In the wrong hands, the
equipment could be used to
manufacture false ID's and
bogus credit cards. Trade
references were submitted. The
goods were shipped on open
account. A small amount of the
total order was paid. Repeated
calls for payment were met
with excuses. Next, the local
company placed a substantial
order. The U.S. company did
not ship the items.
CS Montreal discovered that
the individual/individuals
behind this scam had two
office addresses in Montreal
(both bogus), two billing
addresses (one in Montreal and
one in the United States), two
drop-ship locations in the
United States and two home
addresses (one in Montreal and
one in the United States). The
president of the company had
possible criminal ties.
Case 3:
A local apparel distributor
contacted a U.S. supplier of
truck parts. Three trade
references were submitted
along with a bank reference.
The truck parts were shipped.
The local company refused to
pay claiming some of the goods
received were damaged.
Inspectors were then sent to
check the items. The
inspectors could not determine
whether the goods were damaged
in transit or by people who
had access to the warehouse
(which was shared by several
other entities). The U.S.
company offered credit for the
damaged goods and asked
payment for the balance. The
local company gave excuses but
failed to pay.
CS Montreal discovered that
the local company had over 17
lawsuits filed against it -
mostly for non-payment of
merchandise and all with the
excuse that the goods were
damaged. The local company
declared bankruptcy. Needless
to say, the assets had already
disappeared -- we learned that
the truck parts had been sent
to the Middle East.
Case 4:
A local computer part
distributor contacted an
American company with an
initial request for credit.
Trade references were
submitted. The initial
requests for credit were at
first for small amounts. The
first invoices were paid. Then
the local company started
ordering larger amounts,
offering post-dated checks
that eventually bounced. The
company then closed its doors.
CS Montreal found that the
local company had been a
legitimate business for
several years at a different
location. The trade references
provided were of legitimate
companies. However, the
company had started to
experience financial trouble
and when approached by
unsavory sources, the owner
handed over his name and
company to those individuals
who proceeded to defraud U.S.
suppliers. Some U.S. suppliers
were also encouraged to come
to Montreal and visit the
office.
Case 5:
A local computer reseller
contacted an American company
asking to place an order.
Trade references were
submitted, including a bank
reference. None of the
references were located in
Quebec. The local computer
reseller ordered the parts and
the checks were issued by
another local company. The
checks were returned by the
bank NSF.
CS Montreal discovered that
both of these companies were
being investigated by the
Montreal police for fraudulent
activities.
PROTECT YOURSELF
It is impossible to say at
this point whether the
companies victimized as
described above will ever get
their money. With these
stories as background, CS
Montreal urges U.S. companies
to do everything feasible to
protect themselves in advance
from making bad credit
decisions that could cost
thousands or millions of
dollars. Here are some
suggestions for U.S. exporters
to Quebec to minimize monetary
loss.
- Decide whom to grant
credit to
First, companies should
establish credit policies
for shipping to new
customers. While some
companies may prefer to
ship on open credit, it
may be more prudent,
especially in dealing with
a new customer, to ship
with a letter of credit,
documents against payment,
with the personal
guarantee of a principal
of the Canadian company,
or other secure means of
assuring payment.
Companies should also
use a good credit
application form. The form
should request full
contact and background
information about the
company and its
principals, bank and trade
references, and any other
information the U.S.
company deems necessary to
protect itself before
shipping the goods. The
form should include an
authorization for the
references to release
information on the
customer.
- Check references
It is essential to check
the references directly. A
company should not rely on a
copy of a credit report
obtained from the proposed
customer. As for trade
references, an exporter should
carefully research the payment
history of the proposed
customer if the exporter is
contemplating shipping on open
credit. Bank and trade
references should also be
checked for legitimacy. A
number of credit reference
bureaus can be found at:
http://strategis.ic.gc.ca/sc_coinf/ccc/engdoc/basicSearch.html
In addition, in small to
medium-sized businesses, there
is a significant correlation
between the principal's
personal credit and the
overall financial well-being
of the company. There are
three credit bureaus in Canada
which have information on
individuals that may be
obtained for a legitimate
business purpose:
- Equifax Canada
- Consumer Relations
Department
- Box 190 Jean Talon
Station
- Montreal, Quebec
- H1S 2Z2
- Tel: 514-493-2314
- Fax: 514-335-8502
- Web: http://www.equifax.ca
-
- Trans Union
- Consumer Relations
- 709 Main Street W.
Suite 3201
- Hamilton, Ontario L8S
1A2
- Tel: 1-800-663-9980
- Fax: 905-527-0401
- Web: http://www.tuc.ca
-
- Northern Credit
Bureaus
- 336 Rideau Boulevard
- Rouyn-Noranda, Quebec
- J9X 1P2
- Web: http://www.creditbureau.ca
Just as in the United
States, the BBB offers
consumer and business
guidance, dispute resolution,
news and alerts:
- Better Business Bureau
of Quebec
- 785 Plymouth Ave.,
Bureau 304
- Ville Mont-Royal,
Quebec
- H4P 1B3
- Phone: 514-286-9281
- Fax: 514-286-2658
- E-mail: bbbbec@bbb-bec.com
- Web: http://www.bbb-bec.com
The Inspector General of
Financial Institutions (IGIF)
supervises and monitors the
activities of all financial
entities (except banks) that
operate in the province of
Quebec. As part of its
responsibilities, it furnishes
and maintains a list of all
companies registered in
Quebec:
- Inspector General of
Financial Institutions (IGIF)
- Inspecteur général
des institutions financières)
- 800, place d'Youville
- Quebec, Quebec G1R 4Y5
- Phone: 418-643-3625,
1-888-291-4443
- Fax: 418-643-3336
- E-mail: igif@igif.gouv.qc.ca
- Web: http://www.igif.lautorite.qc.ca/english/index_english.htm
The IGIF website provides a
quick search tool to find out
whether a potential business
partner is legally registered
as a company. For the time
being, the information
supplied is only in French.
However, the form is easy to
understand. It provides
information on when the
company started, the address,
type of business, the full
name and other names used by
the company, the names of its
principals and whether the
company still exists legally.
Two Internet telephone
directories enable a company
to check the listings of
prospective business partners:
More than 27,000 Quebec
companies are listed on the
following web site with
company profiles and a
description of their products
and activities. It is
available in English and
French.
- Centre de Recherche
Industrielle du Québec
(Industrial Research
Center of Quebec)
("CRIC")
- 8475, avenue
Christophe-Colomb
- Montreal, Quebec
- H2M 2N9
- Phone: 514-383-1550
- Web: http://www.icriq.com/en/index.html
The Canada Post website: http://www.canadapost.ca/segment-e.asp
provides a means of verifying
whether the building address
of a potential business
partner actually exists.
A large number of court and
bankruptcy records are also
available. These can be used
to check whether any lawsuits
have been filed against a
potential customer or whether
the company has filed for
bankruptcy:
- Palais de Justice de
Montréal (The Montreal
Court House)
- 1 Notre-Dame Street
East
- Montreal, Quebec
- H2Y 1B6
- Phone: (514) 393-2256
- Fax: (514) 873-4760
- Web: http://www.barreau.qc.ca/
Judgments and Bankruptcy
Records:
Schemes of collocation,
default judgments, special
forms of service, referrals
to small claims:
514-393-2000
Bankruptcy records:
514-393-2058, room 1.30
Office of the
Superintendent of Bankruptcy
Canada: Phone: 613-941-2863,
web: http://osb-bsf.ic.gc.ca/
c. Contact the U.S.
Commercial Service
The U.S. Commercial Service
(USCS) of the U.S. Department
of Commerce offers a network
of offices throughout the
United States and in major
markets throughout the world
including regional offices in
six cities in Canada to assist
U.S. exporters. U.S. exporters
should contact their local
Export Assistance Center or CS
Canada for counseling on how
to approach the market in
their desired region of Canada
and how to avoid or resolve
problems with business
partners.
USCS offers a number of
excellent programs to help
export-ready companies
identify and secure
relationships with quality
distributors in foreign
markets. For further
information, companies should
check http://www.BuyUSA.gov/canada
and http://www.export.gov/comm_svc/.
The Gold Key Matchmaking
Service and the International
Partner Search, in particular,
can help U.S. manufacturers
identify qualified foreign
distributors, agents,
representatives, licensing
partners, or joint venture
partner. Through the Gold Key
program, program, the USCS
arranges appointments for U.S.
companies with pre-screened
distributors (and/or other
contacts identified by the
client) whose interests and
objectives match those of the
U.S. manufacturer. The
International Partner Search
program provides a report of
screened and interested
companies for U.S. exporters
not able to travel to Canada
for business meetings.
In addition, USCS offers a
number of other
services/resources, including
market research and a program
of trade events to assist U.S.
companies enter new markets.
For further information or
assistance from CS Canada,
contact: CS Halifax, (902)
429-2482 ext. 102; CS
Montreal, (514) 398-0673; CS
Ottawa, (613) 688-5217; CS
Toronto, (416) 595-5414; CS
Calgary, (403) 265-2116; and
CS Vancouver, (604) 685-3382.
CS Canada is also on the World
Wide Web at: http://www.buyusa.gov/canada.
In addition to the sources
found above, you may also wish
to check our ExportMichigan
companion sites pertaining to
credit evaluation and
insurance:
Date Updated: March 27, 2007
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