Whether it’s a shell company that wants to buy several loads of whatever with intentions to vanish shortly after the purchases, or one person that’s fraudulently impersonating another or a company, it can take time to effectively vet new prospective customers, and the numbers say so.
There isn’t an ironclad, foolproof vetting process, but some are certainly better than others. We’ve written this before, but it’s worth repeating—here are several suggested steps to onboard a new customer.
First, verify the business entity—this isn’t necessarily a sign of legitimacy, but it’s the first step. A significant gap between the supposed commencement date and the charter date may be a red flag.
Second, verify contact information, such as Googling the address. How does the business present itself? Not having a physical address or just a P.O. box are potential red flags as well.
Third, examine the website. Is it sophisticated? How much information is available? Perpetrators want you to believe they’re invested in the industry. Misspellings and grammatical errors may be red flags, along with social media icons that go nowhere.
Fourth, examine ownership and personnel. No recorded industry experience or an unverifiable background can also be red flags. Scammers may say things like: “I worked on a farm in another country for the last 20 years,” or “I worked as a handyman prior to starting a produce business.”
Fifth, interview the new customer. Pay close attention to behavior, test their industry knowledge, and make sure their story sounds legitimate. Pushiness, impatience, and inconsistencies could spell trouble.
Sixth, identify communication preferences—most perpetrators seem to prefer text, WhatsApp, or email and typically want little verbal contact. Avoiding verbal contact can certainly be a red flag.
Next, ask for and contact references. Be sure references are legitimate, ideally with a published Blue Book listing. And finally, run a credit check.
Blue Book business reports are now unlimited for members, and we offer additional insights through our Background Check report.
And, coming soon—did you know Blue Book will be launching a new credit application service this year? We can help you vet new customers.
More to Verify
According to the aforementioned 2023 survey conducted by the Association of Certified Fraud Examiners (ACFE), one of the most common ways companies vet a new customer, at 86 percent, is by checking tax identification numbers.
More than three-quarters or 77 percent collect or verify a business owner’s ID details. They also screen “watch and sanction lists” 73 percent of the time, and will also look into ownership 72 percent of the time.
Similarly, 71 percent will check business industry information which, of course, is where Blue Book’s extensive database and many tools come in.
Well over half, at 61 percent, will check a prospective customer’s corporate filing history and look for any adverse news.
Less common but still valuable, at 54 percent, is checking if a business owner has a criminal history, while 51 percent will look for previous bankruptcies, with 45 percent searching for liens and judgments.
Concluding Thoughts
Fraud is a multibillion-dollar problem across all business sectors and impacts the produce trade as well, with companies losing millions each year.
Whether it’s B2B shell company fraud, impersonation, or a bust-out, sellers must develop effective customer onboarding procedures.
It’s crucial to also realize that fraud is continually evolving.
It’s impossible to identify a bad actor 100 percent of the time, so sellers and service providers must stay agile and be willing to put in the work when it comes to vetting new customers.
If you’re aware of fraud, or your company becomes a victim of it, experts suggest filing a police report with local authorities.
You may also consider filing a report with the U.S. Department of Justice or the Federal Trade Commission. And, please share your experience with Blue Book Services. rating@bluebookservices.com
This is an excerpt from the Credit and Finance department from the September/October issue of Produce Blueprints magazine. To read the whole issue, click here.
