The Scam Approach
Creditor fraud – also known as mandate fraud – is when individuals contact companies claiming to be a contractor, member of the supply chain or client advising that their bank account details have changed.
Payments can then be made into the ‘new’ account, leaving one or both the real contractor and client incurring financial loss which is difficult to recover. Amounts can be significant – into the hundreds of thousands of pounds and sometimes more.
Making it ‘Legitimate’
At Speller Metcalfe we have had experience of two cases where our clients have been informed of our ‘new’ back account details. We believe that those responsible took information from our sites to gain access to our clients, which included:
- Identifying the client name
- Identifying the project scheme
Our Company logo and contact details were obtained – most likely through our website – and our Finance Director was named as the sender using a forged signature.
The Institute of Construction Management (ICM) has identified in the majority of cases of construction fraud companies were contacted by email (56%). In our experience, Speller Metcalfe was contacted by letter in the first instance and in the second by email. Both our clients were based in separate regions, the first in Cheltenham and the second in Birmingham.
The first letter we received was sent to our Cheltenham client, which pre-dated the second incident by a few months. It was not without errors but was passable insofar as our client had changed the bank details to those of the fraudulent request and was about to pay out.
It was only when we chased payment and the client confirmed they would send payment to the new bank details that the fraud was identified.
In the second instance, a letter was received by our Birmingham-based client attached to an email, which would have read almost perfectly to someone external to Speller Metcalfe; a fake letterhead, professional approach and tone and forged signature. Follow-up phone calls were even made to make sure they had received the letter and to confirm the change of account details.
Luckily for Speller Metcalfe, a sharp-minded Purchase Ledger Clerk working for the client flagged up an error in the address on the letter with the Finance Director – just before the exchange of a significant sum. The Director then called our accounts team and confirmed our existing details; no money was lost and the incident is now being investigated by the police.
Avoiding Mandate Fraud
The industry is becoming more aware of mandate fraud and it is through raising awareness we can help others falling into an easy trap.
Andrew James, Partner & Head of Construction and Engineering at Harrison Clark Rickerbys solicitors gives his insight into avoiding scams such as these:
“Unfortunately this type of fraud and also more sophisticated cybercrime is on the increase, and clients and contractors need to be vigilant.
“For the paying party this can be a real issue because it can still remain liable to pay the original debt, and effectively it could have to pay twice in the knowledge that it will face a difficult claim against the fraudsters.
“In practice, companies do not often change bank accounts, and therefore if you receive such a notification, however genuine it may appear, always get specific confirmation from a current director of the receiving party – preferably both by telephone and in writing – that you are authorised to pay into the new account.
“Also review your accounts procedures and consider if you have appropriate checks and balances in place to avoid this and other types of fraud; for example separating out authorisation and payment functions, levels of authority to make payments etc. In the light of this scam, consider putting restrictions on how and when payment details can be changed and who is authorised to do this.”
Please report any instances to the company or individual(s) involved, as well as Action Fraud: https://www.actionfraud.police.uk/.