As fraudsters grow more ambitious with schemes targeting businesses, Better Business Bureau ® of Minnesota and North Dakota is warning business owners and purchasing agents to be on the lookout for fake purchase orders. A recent scam – with roots in the Twin Cities – targeting businesses and involving phony purchase orders has bilked business owners nationwide out of more than $950,000 in reported losses so far.
The fraudulent business entity in question, Waterford Management, rented a virtual office in downtown Minneapolis for a short period of time. They proceeded to create three fictional online entities – ostensibly separate businesses – to serve as business references, and also opened an account at a downtown bank. From there, they created an introductory packet which they sent to janitorial supply and home appliance companies around the country. On a surface level, the information Waterford Management supplied checked out. However, after third-party shipping firms picked up and drove away with merchandise ordered by Waterford, these businesses soon discovered they’d been swindled.
“Based on what we’ve learned from Waterford alone, it’s clear the bad guys have raised their game in regard to business fraud,” said Susan Adams Loyd, President and CEO of BBB of Minnesota and North Dakota. “Therefore, business owners and purchasing agents will have to raise theirs, as well.”
The situation involving Waterford Management isn’t the only report of this nature BBB has received. A local BBB Accredited Business recently reached out to BBB in regard to a large purchase order they had received from a potential customer, supposedly a tech firm in Eden Prairie. When the business owner Googled the address where the merchandise was to be shipped, they discovered it was a residential address, at which point they became leery. After BBB became involved, it was confirmed that the purchase order was indeed fraudulent and had no connection to the legitimate business in Eden Prairie.
To avoid phony purchase orders, BBB advises business owners and purchasing agents to do the following:
- Watch out for unusually large orders. Scammers often target smaller businesses and place large orders, in the hopes the potential for profit overrides the better instincts of business owners. Large orders – particularly from ‘new’ customers – are often a red flag.
- Be leery of email-only solicitations – Many fraudulent operations have roots overseas. Watch out for situations where email is the only form of contact. Also, be on the lookout for misspellings and grammatical errors in solicitations you receive.
- Do your research. Visit org to research businesses looking to do business with you. Keep in mind that business identity theft is a growing issue. Fraudsters can and do impersonate legitimate businesses in the hopes of defrauding unsuspecting businesses.
- Confirm everything. If you receive an order from a potential new customer, even a business with an established track record, it’s still a good idea to verify the order directly with the company. Make sure you’re using accurate contact information, too; don’t go off of the phone number on the purchase order you’ve received.
- Make sure the references are real. In this day and age, creating fake online entities is fairly easy. When you’re doing your research, go beyond a simple phone call. Google the company seeking to do business with you as well as their references. Legitimate companies should have a digital ‘footprint.’ If you can’t find much on a given company or entity, it could mean they’re new or it could mean they’re not what they seem.
- Trust your instincts. A local business owner who received a fake purchase order recently said the size of the order raised a red flag – and the fact they weren’t asked to submit a competitive bid. In addition, BBB regularly hears from consumers and business owners who state they ‘just knew something was wrong,’ but failed to heed that instinct. If something seems off to you, pay close attention to that feeling. Contact BBB if you have concerns about an offer you’ve received by calling 800-646-6222.
- Have a process in place. When it comes to handling orders, make sure you have a reliable system in place to vet and verify those orders.
“We know there are times a large order can seem worth the risk,” added Adams Loyd. “We’re telling business owners to frame things this way: what would it mean if $35,000 of merchandise goes out your front door and you don’t get paid for it?”