Common scams in foreign trade business

With the complexity of the international situation and the frequent occurrence of foreign trade fraud cases, it can be said that for foreign trade enterprises, it is "alarming step by step".

Therefore, this article systematically reviews the risks and preventive measures of foreign trade fraud, hoping to provide some reference value.

Conclusion:

For important foreign trade orders, it is necessary to investigate the authenticity and payment ability of the buyer and the order, grasp the transaction method, and ensure the legality of the order promotion procedures.

Even if the buyer designates a transaction representative or lawyer, they must independently entrust a third party to conduct due diligence work.

Once found guilty of fraud, immediately report the case to the domestic and buyer's country police, try to stabilize the fraud gang as much as possible, and cooperate with the police to catch them out.

At present, there are several main channels for B2B foreign trade to attract customers, such as joining B2B platforms, establishing independent websites, or operating social media. Regardless of the channel through which customers are obtained, there is a similar risk of fraud.

Therefore, this article combines a case of foreign trade fraud and analyzes the five links of "inquiry negotiation (commission) order formation transportation (production) payment" one by one.

1、 Inquiry: seemingly high-quality customers and orders

1. The first step of fraud: fabricating buyers and orders to deceive sellers' trust

For fraudsters, fraud often starts with inquiries.

This year, we encountered a case where Company A received an inquiry from a Middle Eastern country's B fraudster through Alibaba International. The inquiry was identified as a junk inquiry by the platform, and the buyer's account level was not high. In addition, hundreds of inquiries were sent on the platform in a short period of time, mainly about doll procurement. The fraudster B claimed to be an agent.

At first, Company A was skeptical, but based on the principle of not letting go of orders, they actively responded to the inquiry information and prepared detailed company materials. (Please note that at this point, the fraudster has already started selecting the target of the scam)

At this point, in order to clarify the authenticity of the order, Company A took two verification measures, but it was precisely these two measures that further trapped it:

(1) Company A searched for the "actual" buyer C Foundation through Google Maps and found that there is indeed such a foundation in the country, and its official website has previously published similar "Chicken You Too Beautiful" doll procurement information;

(2) A company checked the email address of B fraudster and found that it was the email suffix of a local enterprise, which indeed exists.

Company A began to believe that the buyer truly existed, but did not realize that it was not this foundation that contacted them at all.

2. Risk point: The risk of commercial information leakage and impersonation

The risk at this stage is usually not the fraud of funds, but the leakage of business information of the enterprise.

When enterprise information, materials stamped with the company seal or signed by a legal person are leaked, they may be used by criminal gangs as fraudulent materials and may impersonate Company A for other fraudulent activities.

We have encountered cases where the fraudster impersonated a Chinese enterprise to commit fraud abroad, and the victim reported the situation of the Chinese enterprise to the domestic police based on the information.

3. Cracking solution: Seeking local personnel to confirm the authenticity of the order offline

Usually, in order to save costs, foreign trade enterprises rarely conduct due diligence on orders or buyers during the inquiry stage.

As this stage does not involve the exchange of funds and goods, it is not recommended to initiate due diligence at this stage.

So, what can we do at this stage?

(1) If there is a local partner, you can make a preliminary inquiry with the partner to confirm the existence of the buyer, and confirm the existence of the order through effective contact information (which must not be the contact information provided by the buyer) (this avoids the risk of "real buyer, fake order");

(2) If it is not possible to confirm, vigilance must also be maintained, and attention should be paid to indicating the purpose of all materials provided. It is best not to provide materials with seals or signatures at this stage (this avoids the risk of "identity being falsely used").

2、 Negotiation: seemingly reasonable procurement process and procedures

Step 2 of Fraud: Lock in sellers through formal procedures such as bidding and tendering

Continuing with the above case, it was discovered that Company A had a strong interest in the order and had a certain payment ability, and scammer B began performing. The fraudster B stated that he has a relationship with the C Foundation under the government of the country, which can help him secure a purchase order for the "Chicken You Too Beautiful" doll worth 10 million euros, but requires a commission of 1% of the order amount.

The behavior of fraudster B requesting the return of the commission has once again strengthened the confidence of Company A, as this is the usual method used by many foreign brokers. In order to facilitate the transaction, Company A not only agreed to the commission request, but also proactively increased the proportion to 1.5%.

Scammer B quickly replied to the email, requesting Company A to fill out a detailed supplier bidding document, and requesting Company A to send the document to an email with the suffix C Foundation, with a special instruction that 'cannot be copied to Scammer B'.

After sending the bidding documents, Company A quickly received a response from the "C Foundation" stating that Company A's bidding documents had been reviewed and won the bid. (Please note that Company A has fully trusted the authenticity of this transaction here)

2. Risk points: bid bond, etc

At this stage, if the fraudster claims to use the Tendering&Bidding process, it is possible to generate a bid bond.

At the same time, some fraudsters will also demand a certain amount of prepaid commission at this stage.

If the order itself has strong appeal and a high level of trust in the early stage, the enterprise may agree to pay the relevant fees, but after payment, there will be no news.

3. Cracking solution: Request to provide bidding materials and commission local investigations

The bidding materials will definitely provide information about the bidding party and bidding agency. At this time, you can search for the bidding contact information of the above-mentioned institutions through public channels and contact them for confirmation.

If the amount of the bid bond is large, it is necessary to entrust a lawyer to verify the order status of the bidding party. In principle, whenever it comes to starting to pay, the necessity of third-party intervention should be considered. Otherwise, it is highly likely that with the rising cost of sinking, the ship will become difficult to get off.

Of course, the workload at this stage is not significant and can be used as a part of subsequent transaction due diligence, and there is no need to commission separately.

3、 Completion: Cheating various warehousing, auditing, and banking fees

Step 3 of Fraud: Forgery of Various Government and Bank Documents

After receiving the winning materials, Company A was very happy and paid a small commission to the intermediary. Afterwards, the C Foundation began to continuously propose "transaction requirements", and each requirement had a fee.

(1) Require Company A to appoint a lawyer designated by the foundation as the contract signing representative and act on its behalf to complete other procedures (please note that Company A's consent here determines the outcome of their continued fraud);

(2) Require Company A to register as a supplier for a certain government procurement platform in that country, and require a Deng Bai enterprise code;

(3) Require Company A to pay legalization and stamp duty fees in order to obtain an ECA number;

(4) Require Company A to provide a production schedule, legal person passport, etc., and complete all notarization procedures.

Company A has fulfilled these requirements one by one, seemingly approaching the completion of the order step by step, but in reality, it has paid significant process fees for this. It is worth mentioning that when Company A reported to the B fraudster that the fees were too high, the B fraudster generously promised to help Company A "advance" a portion of the fees.

The abnormal behavior of the lawyer appointed by the foundation seems to Company A like a relationship customer who is not familiar with the business. This lawyer always charges in RMB through different domestic bank accounts in Sichuan, Yunnan, and Guizhou, and explains that he is a partner of the law firm in China (the fraud is already very obvious here, but Company A has completely trusted and did not detect it).

2. Risk points: prepaid commissions, taxes, notarization and certification fees

At this point in time, the company has already placed great trust in the fraud gang. Therefore, the fraud gang began to boldly demand fees. The fraud gang will also assess whether their asking price is too high. Once Company A is unable to accept the cost, the fraud gang will use reasons such as "helping Company A pay a portion" to stabilize the situation.

The fraud gang demanded a small amount and multiple times of fees, causing the company to be cheated out of a large amount of money before discovering something wrong.

3. Cracking solution: Request and verify bills, and verify the authenticity of materials

In emerging market countries, whether it is large foreign trade orders or international engineering projects, many are led or participated by the government. Therefore, various supplier qualifications, taxes, and certification notarization fees objectively exist. Countries have varying requirements, making it difficult to summarize a universally applicable cost list.

So, how to avoid being scammed?

(1) Firstly, it is important to pay attention to the payment method. Government taxes generally have specific collection accounts, and priority is given to directly transferring fees to these accounts to effectively avoid fraud. Once suspected fraud is discovered, it is also possible to coordinate with the government or relevant institutions to refund fees;

(2) Secondly, if direct payment is not possible, it may be considered to entrust an independent third party for payment (which must not be specified by the buyer);

(3) To obtain a receipt for payment of fees, such receipts are generally available through public inquiry channels. If one is unwilling to provide a receipt or provides a forged receipt, it is natural to detect fraud.

4、 Transportation: fraudulently obtaining international trade goods

Step 4 of Fraud: Using the International Trade System to Force Sellers

Company A, after paying a huge price, finally entered the contract performance stage. Due to the payment method chosen by both parties being OA (Open Account), Company A needs to ship the goods first, and Fund C will only make payment 7 days after receiving the goods.

After completing the customs procedures and shipping the goods, Company A mailed the bill of lading to the address designated by the C Foundation. However, the fraud team rejected the documents and used the rules to delay delivery. According to some national regulations, goods will be auctioned off by customs if they are left unattended in customs.

At the same time, B fraudster proposed to Company A that they were willing to find other buyers to purchase this batch of goods at the original 70% price. Helplessly, in order to recover the loss, Company A had to agree to sell the goods at that price.

2. Risk point: Risk of goods during production and transportation

Once the seller schedules production, whether it is their own production or seeking OEM, they will incur high costs as a result.

In a self-produced scenario, once there is a problem with the order, the already produced part can only be sold at a discount;

In the OEM scenario, once an order has problems, it will face the dilemma of default or backlog of goods.

Once there are problems in the transportation and delivery process, the goods may even be detained overseas.

3. Solution: Choose a reasonable trading method

If there is no sufficient investigation in the early stage, the seller's risk will become more obvious in the contract performance stage, and they must be more cautious in the transportation process.

In international trade between Europe and America, due to the relatively mature market and well-developed systems, many enterprises tend to choose the FOB model. But when trading with emerging market buyers, giving up the right to goods too early seems unreasonable.

That is to say, one should:

(1) Pay attention to selecting appropriate international trade terms, controlling the ownership of goods is crucial. Choosing trade terms that the seller can control the goods and entrusting a long-term reliable freight forwarder can help avoid the risk of goods falling out of control;

(2) Pay attention to payment nodes, avoid OA mode as much as possible, and consider using more neutral L/C or D/P methods.

5、 Payment: Refund after payment on the surface

1. Step 5 of Fraud: Utilizing Differences in Bank Transfer Rules in Different Countries for Refunds

Company A agreed to accept 70% of the price from the new buyer, so both parties negotiated to pay for the goods after receiving the bill of lading. After the buyer made the payment, the fraudster B continuously urged Company A to pay the commission.

Company A believed that the money had already been received, so it did not consider transferring the remaining commission directly to the fraudster B. However, when Company A attempted to transfer the payment for the goods, it was discovered that the check transfer had already been returned by the new buyer through a complaint that the signature did not match.

So, Company A finally discovered the fraud situation and reported it to the domestic police. However, all the fees and commissions paid by Company A in succession are no longer traceable.

2. Risk point: Receipt and entry of bank transfers

At present, many people have reported on the internet that fraudsters use bank checks and credit card rules to transfer funds, and appeal for the withdrawal of transfers after obtaining commissions.

Sellers without prior judgment often experience a 99% drop in alertness as soon as money arrives. But fraud gangs are taking advantage of this, based on the normal mechanisms of banks, to seize the seller's slack after receiving payment and scam them into obtaining commissions.

3. Solution: Familiarize yourself with bank transfer rules and promptly contact the bank to confirm the situation

Enterprises should pay attention to bank transfer and receipt rules when handling collection accounts.

At the same time, when dealing with the receipt and payment of large amounts of funds, close contact should be maintained with bank customer service. Before completing the next step, it is important to confirm that the relevant funds have been safely placed.

At the same time, it is also important to choose a bank or third-party payment platform with more reasonable and beneficial rules for the payee, while taking into account the convenience of payment.