Stay vigilant. Trust your instincts. Ask for help.

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By Jeff Riley Director, Loss Prevention, Tech Data Corporation
      and
      Scott Heim Fraud Investigator, Tech Data Corporation

Some things are too good to be true. If you remember nothing else from this article, remember this simple advice:
If something seems to be too good to be true, it probably is.

Most, if not all of us, have experienced a fraud attempt in either our personal lives as consumers or professionally while representing our companies. Some VARs are surprised to learn that fraudsters target businesses just as regularly as they do consumers. The reason is that the potential gains—and thus the potential risk to VARs as business owners—are much higher. Losses incurred from a single fraud event can be substantial enough to put a VAR out of business. Consequently, all VARs need to make sure that fraud prevention is top of mind with their employees.

Know What To Look For
The IT channel is an exciting target for fraudsters and criminals. We work in a high-volume industry with cool, in-demand technology products that are quickly and easily resold. Having an awareness of current fraud trends occurring in the channel is your most valuable defense. Providing that information to staff is an important action to take. Often a mere reminder to employees that fraud does occur can be beneficial. Unfortunately, it is all too easy for employees to become complacent when it comes to fraud events. It’s up to business owners and managers to continually remind their teams about the risk of fraud and what to look out for.

The following is a rundown of some common fraud tactics still plaguing the channel:

Bust Outs – This is the most dangerous type of credit fraud we’re seeing in the market from a financial impact perspective. Essentially, a criminal will secretly acquire ownership of a legitimate company you may or may not have been doing business with. Slowly but surely they will work to increase all their available credit lines with VARs, distributors and other suppliers, paying their bills on time to build your trust. Once they believe they have maximized all their credit capacity, they’ll place several final large orders and never pay. In most cases, the perpetrators are out of the country by the time you realize you’ve been ripped off. That could leave you on the hook for tens of thousands of dollars or more, and can be devastating to any business.

	Consult The Experts If you have a concern or question about a potential fraud attempt against your company, contact authority@techdata.com.

Credit Card Fraud – This scam should serve as a reminder to everyone who conducts business with credit cards to be extra vigilant. The most common scenario here begins with a new customer contacting a VAR with a recently—but as of yet unknown—compromised credit card. Believing the card is good, the VAR ships and bills the order. Once the rightful card owner realizes their account has been compromised, the credit card company issues a charge back to the VAR, who is responsible for the transaction. By the time that happens, the criminal is usually long gone with the product. Again, the VAR is left holding the bill.

Business Identity Theft – Businesses of all sizes have been targeted with this type of fraud. These schemes can be very sophisticated, and the impersonations can be very convincing. A criminal will steal a company name, messaging and branding to develop legitimate-looking websites and communications like e-mail addresses and letterhead. VARs may think they are partnering with a legit entity or feel fortunate that a Fortune 500 company has decided to partner with them. But, in reality, it won’t be long before a VAR finds they’re dealing with a criminal. As scary as it sounds, these criminals are becoming so bold that they also are impersonating government agencies. Remember to always do your due diligence even when you think you’re dealing with an established company or government agency.

Red Flags
Fortunately, there are ways to spot most fraud attempts if you know what to look for. A sales representative should review information associated with a quote or order such as the types of products ordered, the shipping terms requested, the customer contact information and the requested ship-to address. Overnight shipping requests by new customers, shipments to freight forwarders and large orders for items like memory, toner cartridges, hard drives, notebooks, tablet PCs, processors, digital projectors, HDTVs and networking gear should always raise suspicion.

A credit professional should review all information associated with a credit application for possible links to past baddebt accounts or known fraud situations. Any information that would suggest a viable market presence for a new customer, along with any trade references or financial statements provided, also should be scrutinized carefully. Any information that is deemed suspect or possibly fictitious should spur further research. Follow-up with trade references. Are they using a physical address or P.O. Box? Can you find any advertising about the company? Are they providing unaudited financial statements? Was there an ownership change with an inactive account now requesting credit terms?

Trust Your Instincts
Often when a victim falls for a fraud scheme, staff involved will recall an “I should have known” moment. There was something that just didn’t make sense about the fraudulent order. While we can talk about the benefits of being aware of current fraud trends and the value of attempting to identify typical red flags for potential fraud situations, often fraud prevention comes down to simply trusting your instincts.

No matter how detailed an organization’s fraud prevention program might be, there will never be any substitute for the human element in identifying and preventing fraud before it can occur. Encourage your staff to trust their instincts. Knowing that something isn’t quite right is a valuable tool, and further investigation should be undertaken of any potential order request or new account application that doesn’t feel right.

Awareness Is Key
A comprehensive fraud-prevention program starts with awareness. Educate yourself and your employees about current fraud trends. Maintain good records on all your customers and any bad-debt situations you’ve faced for future cross referencing. The industry sees the same criminals coming back again and again, only stopping when they are caught and sent to jail.

Finally, establishing a network of industry contacts who specialize in fraud prevention can be extremely valuable. Alert your peers to suspected fraud attempts, and remember that Tech Data’s Loss Prevention and Security team is always a resource for VARs to turn to for assistance. Our entire industry has a stake in all of us doing what we can to limit the success of these criminals.

	Spot Fraud Fast Pay close attention to these warning signs: A new customer uses a free e-mail account (Gmail, Yahoo!, Hotmail, etc.) A customer sends e-mail from a misspelled company domain name A new customer request is received via Text Telephone (TTY) or Telecommunication Device for the Deaf (TDD) A credit card number is rejected and a new one is provided over the phone Large orders are placed consisting of toner cartridges, memory, hard drives, processors, notebooks, tablet PCs, HDTVs, digital projectors or cameras A new customer uses priority overnight shipping, especially out of state The customer isn’t interested in negotiating price Communications are written in poor English, going well beyond common typos or misspellings Shipping is expedited Ship-to address is residential Ship-to address is changed during transit Phone or e-mail

About the Authors
Jeff Riley is the director of Tech Data’s Loss Prevention And Security Department. Riley has more than 24 years’ experience in law enforcement and security. He has held a leadership position at Tech Data for more than 10 years. He leads a team of corporate security professionals throughout the company’s U.S., Canada and Latin America operations.

Scott Heim is a fraud investigator with Tech Data’s Loss Prevention And Security Department. Heim is responsible for managing Tech Data’s fraud prevention program. He has been with Tech Data more than 10 years and specializes in mitigating and combating fraud in the channel.