Paul is sitting at his desk in a makeshift office in South Africa. He has no funds and no clients, but he does have a laptop with an internet connection. And that’s all he needs to trick businesses out of hundreds of thousands of dollars.

First, he finds his target companies: chemical producers that are covered by trade credit insurance. Then, he identifies a major buyer in his targets’ industry: a pharmaceutical company for which Paul can easily obtain financials and contact information. He prepares a standard credit application pack in the pharmaceutical company’s name and sends it to all his targets, who happily fulfill the orders as they’re covered by their respective insurers.

Two months later, Paul has long since received his goods and sold them on the black market, but the invoices are still outstanding. His contact details turn out to be dead ends. And when the chemical producers reach out through the pharmaceutical company’s official website, what do you know? They’ve never heard of Paul.

I see scenarios like this on a regular basis. And the kicker to this story is that the unpaid invoice will not be covered by trade credit insurers, because most policies don’t cover a sale when goods have been delivered to a different company than the one stated on the invoice.  
Business fraud is a huge problem in South Africa, but it’s not just a local issue: credit fraud is a rising problem worldwide that has been accelerated with digitalization and remote working. Paul’s story is based on identity theft, which is the most common type of business fraud in trade credit. But fraudsters can adopt a number of tactics. The good news is, whichever method they use, there are a number of common red flags that should alert a company’s credit department to a problem.
If a potential  client’s email address bears a generic email handle rather than a company name, it should set off alarm bells. But these days, fraudsters take it one step further, by creating perfectly professional email addresses. For example, if a real company’s email handle is, the fraudster might use Always cross-check clients’ email addresses via their company’s official website.  

Another giveaway is if the delivery and invoicing addresses don’t match, and especially if they’re not in the same country. A Google Maps search could help determine if the delivery premises look legitimate.

Financial documents are a very good place to look if suspicions rise based on a client’s contact details.

There are many inconsistencies that can be found:

  • Audited financials are available shortly after year-end (realistically, an audit takes at least three months).
  • Audited pages differ in format or color from the rest of the company’s financials.
  • The auditors named on the financials differ from those generally used by genuine companies, or their signatures look copy/pasted. In this case, contact the auditors to confirm they signed the financials.
  • Figures are in international, rather than local, currency (unless you’re trading in one of the few countries where accounting laws authorize the use of international currency).
  • Financial figures from first-time clients are overly positive.
  • Documents are covered in an exaggerated number of official-looking stamps.
Fraud can happen across many industries, but some are more prone to it than others. If your company is selling tangible goods that can be easily sold on the black market—such as construction materials, chemicals or tires— it is wise not to release any orders without doing the necessary credit checks.
If a new client places an order and stresses the urgency, your credit department should make sure all the points above check out. Urgency is a common tactic to all types of fraud: the aim behind it is to prevent thorough checks from being carried out.
Business fraud may be on the rise, but the knowledge at our disposal for detecting it is growing at the same speed. Thanks to our wealth of experience and global reach, Allianz Trade’s analysts have the tools to recognize a scam when we see it and offers solutions such as business fraud insurance  to help companies protect themselves. And as a senior underwriter at Allianz Trade, part of my job is making sure our clients are armed with this knowledge, too—so they can stop a fraud attempt before it’s too late.
Natasha Ferreira
Account and Market Manager