Christmas leaves business vulnerable to corporate identity fraud – How can you protect your company?

This month, RJP uncovered a serious case of corporate identity fraud committed against one of our clients, Class Affinity Projects Ltd, a telecoms specialist trading as Class Telecommunications. They had their identity professionally ‘cloned’ by highly sophisticated fraudsters who went to great lengths to obtain hundreds of thousands of pounds worth of credit for goods and business services using their identity.

Companies like Class Telecom with an impeccable credit history are prime targets for this fast growing type of crime, which is becoming more prevalent as a direct result of the economic climate. Personal identity theft has increased by over a third since 2010 and in the US, Dun and Bradstreet estimate corporate identity theft accounts for 15% or all commercial credit losses.

For business owners, this case demonstrates how important it is to be vigilant because a business is not just a consumer of goods or services, but a supplier of goods to other businesses. And it is actually this latter scenario of supplier that is most likely to result in financial losses for victims.

We would like to thank Julian Miller, CEO at Class Telecom for giving RJP this opportunity to share these insights with our other clients. In doing so, we hope to prevent the same thing happening to other businesses.

How it all began – re-registering a registered address

This example of corporate identity fraud and cloning began when the registered office address for Class Affinity Projects Ltd was changed. It happened without the company realising, simply because the fraudsters could download the appropriate forms from Companies House, forge director’s information and signatures and then post off the paper forms for processing.

Christmas period provided ideal window to create bogus identity

The fraud was first discovered by Class Telecom after they received an email notification from an independent credit checking agency stating that a change of registered address had been effected on Friday 4^th January. This was based on a request made on 20^th December. These fraudsters changed the registered address from Class Telecom’s accountant, RJP in Thames Ditton, who act as their company secretary, to one in Oldham.

After making this change they set up bogus trade accounts, phone numbers, a fake website based on a clone of another telecom company’s website and corresponding email addresses. Using this new cloned identity, they ordered a wide range of goods worth over £500,000 during a spending spree over the weekend of 4^th to 6^th January.

On January 7^th, Class Telecom received a call from a credit checking agency stating that they had received an application from Class Affinity Projects Ltd to establish a new account, which would be used to ‘verify’ the identity of the company. This credit agency became suspicious of the application because they spotted that Class Telecom appeared to have recently changed its registered office details. Alerted to this situation, they then noticed that purchase orders for goods ordered by the fraudsters contained basic spelling mistakes.

Esso targeted for £500,000 fuel card

This phone call became the first of many received over the week of 7^th January by Julian Miller, the company’s CEO – all from other business suppliers whose suspicions had been alerted. A very wide range of companies had been targeted including SMEs, much larger brands like Esso, who were approached to open a company fuel credit account card to the value of £500,000 as well as Vodafone.

Another potential victim of the bogus orders were an IT equipment provider, who had been approached to open up an account providing the fake Class Telecom with credit to the value of £20,000. In this case, the fraudsters had succeeded in passing all the suppliers preliminary security checks and, just about to dispatch £9,000 worth of goods including iPads, laptops and iPhones, until the company’s financial controller decided to make a few final phone calls to satisfy their innate curiosity.

Julian Miller and his team, supported with advice from RJP, worked very quickly to reinstate the company’s official registered address, RJP’s office. They contacted banks, credit card companies, credit checking specialists and major suppliers informing them of the fraud and to be vigilant for bogus orders. Acting in this way limited Class Telecom’s liability for any orders the fraudsters had made, because in effect, they were not actually ordered by the company, but a clone.

Extent of the professional ‘company cloning’ revealed through mistakes

Further investigations highlighted that the fraudsters had developed a fake website using the company’s full name, Class Affinity Projects Limited and were promoting an 0871 company phone number. At first glance this website looked authentic to suppliers, but was detected because of spelling errors mentioning another company with a similar name, Clarke Telecom. This helped Class establish that this fake site, which used the domain name www.classaffinityprojects.co.uk to appear more similar to their registered name, was actually a clone of Clarke Telecom’s website. This infringement of another company’s copyright and brand identity meant the site could be removed very quickly.

Fake registered address is run down Oldham property

Further information about the extent of the fraud was uncovered because coincidentally, one of the suppliers involved was located in Blackburn and relatively near to the fake registered address provided in Oldham. They decided to investigate and visit the address out of curiosity, only to discover it was a boarded up, derelict house in one of the most run-down areas of the town.

How to avoid becoming a victim of corporate identity fraud

This chain of events makes it very clear that this exercise had been very carefully orchestrated by professionals who target companies like Class Telecom and prey on unsuspecting suppliers of business services.

Although many bogus orders were intercepted at the last minute, it is still possible that Class Telecom will receive further calls from suppliers who were less vigilant and shipped goods to the fraudsters. CEO Julian Miller, urges businesses to be vigilant because the recent Christmas and New Year period provided an excellent timeframe in which it is possible to effect a change of registered address and open up credit accounts to begin ordering goods.

How did RJP help protect Class Telecom?

RJP helped Class Telecom by restoring its original registered office and advising them to join the PROOF (Protected Online Filing) scheme offered through Companies House.

PROOF provides much greater protection against corporate identity fraud because once registered for the scheme, Companies House will stop accepting paper versions of official forms as well as only accepting forms from a single source. This ensures that all changes made to company details have been requested by the company itself, through a single designated source.

Forms covered by the PROOF scheme are:

• Appointments of officers
• Terminations of officers
• Change of Particulars in officers
• Change of Registered Office Address
• Annual Return.

RJP’s top tips to avoid identity fraud

Be vigilant when being approached by companies for business supplies. The economic climate means new business is often harder to come by but things are not always what they initially appear.

Take adequate time to properly vet the authenticity and identity of new clients and their credit ratings. You could end up the victim after unwittingly supplying high value goods on credit to a bogus address and never being paid.

Avoid corporate identity fraud – Check out customers requesting credit

• Key checks to make to verify the authenticity of a new customer who is looking for credit terms include:
• Verify that the company ordering goods has not recently changed its registered office details. If it has, enquire why, because, as in the case of Class Telecom, they might not be aware of it!
• Check the company has a real, UK based telephone number and not a redirected phone number provided by an overseas provider.
• Take the precaution to speak personally with one of the company directors to verify their identity.
• Investigate web addresses and check whether a company looking suspicious has a website with a .biz or .net extension. If this does not match with Companies House records it may be a clone.
• Check the company is a member of the PROOF scheme.

If you would like more information about protecting your company from identity fraud and the PROOF scheme, contact Collette Reeves by emailing cosec@rjp.co.uk.