How Well Do You Know your
Customer?
Fraudulent business and/or
credit propositions may
include any or combinations of
the following characteristics.
Have any of the following
happened to you??
International
Fraud / Credit Red Flags
- Requests for blank
letterhead and proforma
invoices, stamped and
signed, as well as bank
account information from
the U.S. firm for the
alleged purpose of
transferring funds from a
Foreign account;
- Supposed urgent need for
products or samples to be
shipped immediately,
before payment can be
secured or verified, or
with promise of later
payment; requests to ship
goods by air freight from
stock immediately upon
receipt of a
"certified bank
draft";
- Requests for payment by
a U.S. citizen of an
alleged foreign tax,
registration or legal fee,
or service charge to
finalize a transaction;
- Efforts to acquire a
U.S. visa under the
pretext of visiting the
United States for
legitimate business
purposes by requesting
letters of invitation;
- Promises to the U.S.
firm of contracts to
supply goods or services
to the foreign government,
often through the
"Federal Tenders
Board," which does
not exist;
- Requests that
correspondence and
shipment be sent via
air/express courier
services, although the
solicitation letter came
by regular mail;
- Requirement that U.S.
company representative
travel to a foreign
country to sign contract
and money transfer
documents, or
alternatively, that the
U.S. company provide power
of attorney to a lawyer to
sign said papers. The
latter involves hefty (and
phony) legal fees.
- Vague or implausible
explanation of how the
sender obtained the
company's name as a
contact.
- Termination of an
existing agent/distributor
due to either poor
performance or lack of
market knowledge.
If so, then you need to
know your customer better.
Selection of an international
agent or distributor is one of
the most important business
decisions that the exporter
will make. The international
success of the firm is
dependent upon that decision
as well as the potential for
significant financial loss. In
addition to asking your
prospective business partner
to complete a questionnaire
detailing current business
partners, the U.S. company may
wish to obtain at least two
supporting business and credit
reports to ensure that the
distributor or representative
is reputable. By using a
second credit report from
another source, the U.S. firm
may gain new or more complete
information. Reports are
available from commercial
firms and from the Department
of Commerce's international
Contact Program (ICP)
previously known as World
Traders Data Report (WTDR)
program. The cost of the
report is $100 and it contains
on average 25 distinct data
points about your prospective
customer including business
reputation, existing trade
disputes, business ownership,
number of employees, branch
locations, assets, bank
references, business
capitalization and others.
Commercial firms and banks
are also sources of credit
information on overseas
representatives. They can
provide information directly
or from their correspondent
banks or branches overseas.
Directories of international
companies may also provide
credit information on foreign
firms. For additional
information, you may wish to
contact the international
division of your bank or ask
for a referral from your
domestic bank to their
international correspondent
bank.
If the U.S. company has the
necessary information, it may
wish to contact a few of the
foreign firm's U.S. clients to
obtain an evaluation of their
representative's character,
reliability, efficiency, and
past performance. To protect
itself against possible
conflicts of interest, it is
also important for the U.S.
firm to learn about other
product lines that the foreign
firm represents.
Contacts through business
colleagues and associations
can often prove invaluable to
U.S. exporters. A colleague
with firsthand experience in
an international market may
give a personal recommendation
for an agent, distributor, or
potential buyer. Conversely,
the recommendation against the
use of a representative for
credit or reliability reasons
may save the firm a number of
problems. Attending export
seminars and industry trade
shows are an excellent method
of networking with business
people who have international
experience. In addition, trade
associations can provide a
valuable source of contacts
with individuals who may wish
to share their experience of
identifying and selling to
buyers and representatives in
foreign markets.
Sources of credit
information. Credit reports on
foreign companies are
available from many private
sector sources, including (in
the United States) Dun and
Bradstreet and Graydon
International. For help in
identifying private sector
sources of credit reports,
contact the Ypsilanti U. S.
Export Assistance Center at
734/487-0259. Firms insured by
the Foreign Credit Insurance
Association (FCIA) can also
obtain help from FCIA's
headquarters in New York City
(telephone 212-306-5000).
The following are but a few
of the current reports on
international fraud, credit
schemes and corruption:
- Security Services In
Primorsky Krai (Russia)
- Credit Card Fraud Over
The Internet (Kazakhstan)
- Travel Annoucement- Togo
- Investment Climate
Statement - (Kazakhstan)
- National Anti-Corruption
Summit (South Africa)
- Retail Security Overview
(Canada)
- Anti-Corruption Summit
(South Africa)
- Economic Update -- April
8-14, 2000 (Philippines)
- Anti-Corruption Business
Opportunities (China)
What happens if you have
already been ripped off or
have non payment.? Because the
US Department of Commerce
issues credit reports or are
able to influence private
sector credit reporting
companies, we are able to use
the club of moral persuasion
to convince foreign companies
by issuance of formal trade
complaint. This process
isn’t successful every time
but has resulted in recovered
charge-offs for two local
software firms totaling in
excess of $50,000, money that
the firms would have otherwise
not seen. One situation was a
government organization in
India that was being
"bureaucratic" about
paying. The other situation
was a Canadian firm which had
gone into bankruptcy
proceedings without listing
the Ann Arbor firm as a
secured party.
For more information,
please contact your local
office of the US
Commercial Service.
Date Updated: March 27, 2007
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