Long Firm Fraud

Suppliers of potentially easy to sell commodities such as wines or beers are targets for the Fraudsters in the Long Firm Fraud arena.

Not only the English but also the German term (strass betrug) are misleading for this type of fraud. After the War, Long Firm Fraud developed to such an alarming form of organised white collar crime, in particular post-war London that special police units were established in order to combat it.

Organised criminals work in a team. The ‘front man’ starts up a trade company using capital provided by a ‘financer’. Large quantities of goods which sell easily e.g. spirits and electronics are purchased. These are then sold under cost to quickly get rid of them.

This ‘purchase and sell game’ continues until suppliers extend a line of credit to the cash paying customer. Even banks can be sucked into the developing scam and offer loans to this ‘new customer’ with a big turnover.

The sting comes when large deliveries are taken from suppliers early to mid week. These goods are promptly sold for cash just before the weekend. The criminals, who often work with false identities, disappear without a trace.

There are many variants of this kind of fraud. It is especially dangerous when fraudsters “secretly” take over a traditional company with a good name and exploit the previous owner as an unwitting ‘figurehead’.

Tait Walker’s Forensic Service Manager Frank Nesbitt has investigated these type of frauds operated in the North East and has seen the financial damage caused to creditors.

The Advice is -

1. To consider fraud as a business risk and take it seriously.
2. Don’t recruit Fraudsters. Know your customer or client.
3. Promote systems within your organisation to detect fraud.
4. Consult and seek advice from the Forensic Services team of Tait Walker as soon as possible you suspect a fraud has taken place.