A growing area of concern for wholesalers is fraudulent sales. The types of fraud of which small business owners need to be aware include:
- Check fraud
- Credit and debit card fraud
- Identity theft
- Delivery address fraud
- Malware that attempts to collect credit card information from merchants’ online businesses
The good news is that your business isn’t powerless. Here are some actions wholesalers can take to prevent falling victim to fraud:
- Always check the credentials of new customers.
- Confirm the business address using Google Map satellite view. Fraudsters will often try and get businesses to deliver to bogus addresses. Avoid sending merchandise to P.O. boxes.
- Check that the debit or credit card is not stolen, and confirm that the purchaser is the actual cardholder.
- Always keep the firewall on your systems fully up to date to avoid customer details being stolen. Quiz a suspicious customer about their past orders if you think they could have stolen one of your regular customer’s identity.
- In the credit application, confirm contact and reference information, as well as phone numbers Visit the customer’s website, and confirm that email and website addresses match the contact information on the credit application. The phone number should be published onsite.
- Use card payment security systems to identify potential fraudulent transactions when a card is not present. Current systems include: Visa, Verified by Visa; American Express, SafeKey; and MasterCard, SecureCode.
- An additional system for online businesses is the automated address verification services (AVS) coupled with the card security code (CSC) system. This allows sellers to verify the billing address of a cardholder and crosscheck the security code on the signature strip of the card.
Wholesalers must do all they can to confirm the identity and commercial solvency of the business before they enter into a commercial agreement with a partner. Government records can be accessed online for all 50 U.S. states to validate an entity, ensure the business is active, and compare contact and ownership information. Here are links to two examples: Government Records Alabama Secretary of State and Commercial Recording Division Secretary of the State of Connecticut. A simple Google search will help you find each state’s government records website.
Here are two final points to consider:
1. Respond to mandate and payment changes by calling your customer back on an existing number you know to be correct. Don’t take the request at face value and don’t use the phone number on the request. If the request is a fraud, the number will be, too.
2. Don’t release goods, or send a refund, until you confirm that the funds have cleared.
Although the majority of vendors and retailers are honorable businesspersons, fraud is a concern in any business. By being proactive, wholesalers need not fall prey to business scams.