IBIS Fraud Alert and another IBIS Challenge!
The Substituted Company Scam: (using genuine stolen checks). July 2010
A new scam has hit large companies in the US and Canada. Your defense of daily bank reconciliations (which companies are forced to implement to avoid counterfeit checks), will not detect it.
How it works: A large check, or checks are stolen. A duplicate bank account for the payee company is opened. The stolen checks deposited. The funds are withdrawn by the crook.
How can this happen? Easy! The fraudsters go on line and register a sole proprietorship with your company name, address and telephone number, with the state or provincial registry. (Nobody at the government registry ever checks). They get a genuine registration document. The bank is presented with the genuine registration showing the fraudster as the sole owner of the d/b/a or proprietorship and opens an account. The fraudster deposits the genuine stolen check payable to your company name (naturally without the Inc. or Limited).
Will the bank think it suspicious that a company they thought was large is a sole proprietorship? Unlikely. Will the bank deposit this stolen check? Absolutely. If, as has happened many times, the stolen check is deposited to a fraudulent account and the funds withdrawn, how long will it take for you to determine this, 30 days, 90 days? Warn your reception and accounts payable to be very alert for strange calls about your company checks.
Most States and Provinces do not permit corporations to have the same name. However, they do not have the same safeguard with sole proprietorships and incorporated companies. Have you checked your local State or Provincial Registry in the Sole Proprietorship section lately for names similar to or exactly the same as your company? For further information on this or other scams please contact us.