The Ethereum Scam Database is a useful tool that helps guide cryptocurrency investors away from scammers. Since launching last year, they have identified a total of 2,627 scams including 246 active scams. For more information on the scams identified visit https://etherscamdb.info/.
As a professional fraud investigator, I can say that I have seen all kinds of frauds throughout my career. Likewise, many people have tried to commit fraud against me, especially while eagerly traveling the world. So I would consider myself to be pretty astute in these matters. But even the astute can be challenged.
As a business owner and a due diligence specialist, I know that we have to trust the people we are doing business with …. to some extent.
We trust that they are telling us the truth, that they really do want our services and / or products and they are willing to pay for them.
And if we have aptly employed our due diligence procedures, then we have already vetted our potential new client to verify their legitimacy, purpose and perhaps even their credit history. But how do we protect ourselves when by all accounts, it looks like we entering into a legitimate relationship with a new client?
A few years ago, we were approached by a European investigation firm requesting our services in Canada. According to them, they were working on a multi-jurisdictional fraud case and needed an investigator in Canada to assist them. Prior to commencing work with them, the company was thoroughly vetted and everything check out. Of course what we didn’t know then, was that this company had been set up and licensed as an investigation agency by former law enforcement personnel (or individuals impersonating them) for the sole purpose of committing fraud.
In order to commence this complex investigation, a substantial retainer was requested and received. The money came and was quickly deposited however within a few days, the investigation had been cancelled. The client then requested a partial refund as per our contract.
Weeks of back and forth discussions initiating the contract was followed by a short two sentence email cancelling it. Red flag # 1.
We agreed to refund the money once the cheque had cleared. For those of you that don’t know, a cheque has not cleared just because funds have been made available in your bank account. It can take anywhere from 2-4 weeks for a cheque to clear through the international banking system.
Shortly after advising the client of this, we were told that the investigation was back on. Only now, the investigation budget had doubled and they wanted to send an investigator to Canada to assist us. Red flags # 2 and # 3.
For the investigator to receive an immigration visa, he needed an engagement contract. Once in Canada, he would pay the full amount of the investigation up front and in cash. Red flags # 4. By now, it was clear what was going on.
Lucky for us, we had established fraud prevention procedures to follow.
But how many companies wait the full clearance period before issuing refunds? Or get caught entering into engagement contacts that are then used to secure immigration visas? Or worse?
Companies are at risk of being defrauded just by being open for business. Even with the best due diligence program in place, fraud can happen. So don’t stop there. Protect your business from unintended harm by developing and implementing a comprehensive set of fraud prevention policies.
A recent article published by the Toronto Star highlights the need for doing due diligence prior to entering into new business deals or transactions!!! View Article.
Enviro-Lynx Investigation has just been nominated for the 2013 Fraud Investigator of the Year by Acquisition International – the sponsors of the M&A Awards! Enviro-Lynx Investigation has previously won this award in 2012.
As a Certified Fraud Examiner and a due diligence investigator, I often get due diligence requests from individuals looking to invest in a particular company or investment. I even get requests from individuals looking to invest in financial schemes such as pyramid schemes and ponzi schemes.
Recently, I had such a request from an individual. This individual needed help to identify information that if identified, would allow her to participate in a certain investment opportunity. After determining that the investment opportunity was really a pyramid scheme, I contacted this individual and indicated that I couldn’t help her obtain the information she needed since she would then take that information and participate in the pyramid scheme.
She said that she understood but felt that she was still entitled to the same due diligence that every other investor is entitled to? What do you think? Any thoughts …
The other day, I had a call from a friend. He wanted to know how to conduct a due diligence on a company that he wanted to invest a substantial sum of money with. He gave me the company’s name and the name of the individual that he was dealing with. That’s all he had. After a few inquiries, I determined that the company had only been registered a month. The administrative address for the company was a post office box and there was only and director – lets call him John Smith since his real name was almost as common as this one.
After many, many hours of research and utilizing almost ever resource at our disposal, we were finally able to identify John Smith, the business owner. Subsequent inquiries revealed John Smith’s involvement in a long list of bankrupt companies, on-going civil cases and a number of IRS / tax related cases and liens. Definitely a guy with a questionable business capabilities.
Since this request came from a close friend, I called him as soon as I had put all the pieces together. Much to my surprise, and it takes quite a lot to surprise me these days, my friend had gone ahead and invested his money with John Smith less than 6 hours after making the initial call for help to me. He said he didn’t want to miss out on this “once in a lifetime opportunity”.
Needless to say, he is now trying to get his money back from John Smith. He also graciously agreed to let me tell his story here in the hopes that others will think twice and do their due diligence prior to making major investments or business decisions.
An interesting article was posted on Continuity Central that I thought might be of interest to you all. I found it very enlightening …
Ernst & Young’s Fraud Investigation & Dispute Services team found that 48 percent of UK firms carry out due diligence in their supply chain, with a further 30 percent never doing any checks. The survey of procurement managers and directors also reveals only 6 percent have ever been made aware of unethical activity in their supply chain. The research, which covers UK companies operating across a range of sectors and countries, also found that 14 percent did not know what third-party due diligence meant.
John Smart, Partner and UK head of Ernst & Young’s Fraud Investigation team, said: “The current issues around contamination of products have highlighted the importance of understanding and ensuring the integrity of the supply chain, which is a big part of the DNA of many businesses. Companies are, in most cases, responsible for the actions of third parties acting in their name; however our research reveals that firms, across a range of sectors, are not carrying out basic checks.
“In the case of packaging, when stating the provenance and integrity of products, companies must be able to stand by their claims, requiring transparent disclosure of the entire supply chain. Companies need to be able to defend such statements and to demonstrate traceability of the data and declarations upon which it relies and which form the basis of the trusted relationship it attempts to build with its customers.”
Under legislation firms must ensure that they have put in place measures to ensure the prevention of potential wrongdoing among business partners acting in their names. In particular, following the introduction of the UK Bribery Act, companies must demonstrate they have ‘adequate procedures’ in place to address third- party risks. If they are not compliant companies can be fined or executives imprisoned.
Smart continues: “Relevant laws and regulations, the approach of enforcers and public expectation mean it is crucial for companies to adopt the same risk procedures for third parties that they would routinely enforce in other parts of their business. Firms need to ensure they have an appropriate procurement policy embedded across the organization. It is also important to clearly capture information about the sourcing of products and materials to ensure highlighting of potential non-compliant behavior.”
Here is an interesting article on credit card fraud. – http://www.forbes.com/sites/halahtouryalai/2012/10/22/countries-with-the-most-card-fraud-u-s-and-mexico/