Electronic Frauds Inclusion to Business Fears List

Wrap-Tite Inc. owners appears soft-spoken professionals, but you could experience the humiliation and anger in the voices of Sunny Daga and Suresh Bafna as they narrated how the company lost $500,000 in an email scam through an interview  for a Plastic News story which appeared in the March 24 issue.

Daga said it was half a million and anyone could feel violated.

Despite that, Daga and Bafna are hopeful that they can get their money back. Dan Harris, a Seattle lawyer running the China Law blog told them to forget about it, adding that when they heard about the case, he knew right away it was the old “bank account switch scam.”

His firm experiences the scheme almost every week. And it is really hard – if not impossible- to identify the scammers and get your money back.

In recent years, Harris has frequently written about the email scam.

He writes that if you are immune to this scam, you are just flat wrong. He reckons in a March 10 blog post that the scam hits serious savvy, internationally experienced companies and it is being done because it is so hard to stop.

Harris said that if something goes wrong in China, you should not count on the authorities for assistance – not the police, courts, or the banks- but rather know that you are on your own.

He said he dislikes the scam because he has witnessed so many smart companies fall for it and he views it as the most difficult to detect.

China companies themselves are trying to scan a double payment, or rogue employee running the cheat, after quitting, according to Harris.

He notes that in 2013, the scam became sophisticated as criminal experts began hacking computers and sending out fake invoices. Harris recounts that they could be from China, Nigeria, or Russia.

Noting that most computer networks of many Chinese companies are not secure, Harris wrote that the networks are subject to abuse by employees of the companies and by outsiders. He acknowledges that it is difficult to know whom you are really dealing with when engaging in electronic communication from a Chinese company.

It is after delivering a $400,000 (machine maker Xinle Huabao Plastic Machinery Co. Ltd. $100,000 cut off the price) that Wrap-Tite got its cast film line. After learning an expensive lesson, the executives of Wrap-Tite don’t want this to happen to someone else.

Harris was optimistic that the defrauded company could get its insurance supplier cover the loss because of the contribution of human error. He has some tips to safeguard you from –fraud:

  • Ensure you know the company. Make a visit and be certain you are transacting with the company you visited.
  • Have a written contract when purchasing goods from a Chinese company that is formally stamped with the company’s seal. Ensure the seal (chop) is genuine.
  • Be weary of changes in the payment bank. Ignore an email request to make a change, instead forward the request to the trusted contract at the Chinese company for an explanation.
  • Keep an eye on both the name of the payee and location of the bank. Be weary where there are requests to send money to bank outside China.

Harris also links to seven basic tips to prevent the bank account scam in his China blog published on QualityInspection.org

  • Know several English speakers for every supplier. Have their landline contacts such that you can call in case things go wrong.
  • Request supplier’s bank account information in advance and instruct them to mention it on invoices.
  • Request a fax of every invoice sent to you, and ensure the faxing number belongs to the supplier’s company.
  • Start with a small wire to pay for samples.
  • Come up with a special way for confirming a company’s name.
  • Get a special way for confirming bank account changes that appears suspicious.
  • Pay using a letter of credit.

If you get redundant communications either written, by phone, fax, emails, consider doing away with the deal.

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