Investment Scams

November 25, 2013

FINRA Graphic

The following message provides general information to help you be on the look out for phony invoice schemes.

For their successful execution, these schemes rely on inefficiencies within the targeted business. The qualities they look for are: sloppy bookkeeping, inattention on the part of employees, and perhaps most importantly, the failure of one arm of a business to know what the other arm is doing.

Generally these schemes involve the use of an initial telephone contact. During this call the individual obtains the name of the key business contacts. The persons making these calls are, for the most part, remarkably smooth and charming.

The next contact with the intended victim usually comes in the form of a phony invoice sent through the mail. The invoice usually includes names, figures and other details that contribute to the appearance of legitimacy. These invoices may be paid unwittingly along with a number of other routine bills. In many cases, the amount of the invoice is just small enough to slip by the cheque writer's attention.

Scare tactics are sometimes used to increase the odds of success. A phony invoice, or past-due notice stamped, "pay this bill now" or "we are about to start action" may intimidate the victim into rushing to make out a cheque without carefully investigating the supposedly delinquent charge.

Suckers are quickly identified once they pay and are often flooded with additional invoices for nonexistent subscriptions, supplies, and services. The invoices are carefully designed to look like legitimate invoices for goods or services ordered and received.

In most cases efforts to trace the fraudulent firm that issued the invoice prove futile. 
Your accounting department or the persons responsible for paying bills should be made aware of the phony invoice racket and watch out for dubious bills from businesses with whom you have not done business before.

How to protect your business:

  1. Never place an order over the telephone unless you initiate the call
  2. Ask your local BBB for a reliability report on the company
  3. Check your records to confirm claims of previous business dealings
  4. Before placing advertising, make sure the publication exists. Verify its circulation figures and that its circulation suits your needs
  5. Establish effective internal controls for the payment of invoices
  6. Channel all bills through one department
  7. Verify all invoices with the person who gave written or verbal authorization
  8. If the invoicing company claims to have a tape recording of the order, insist on hearing it.

You may also refer to the following reports for related information: Office Supplies, Con Artists and/or Unsolicited Merchandise/Mail.