A "long-firm fraud" is when a fraudster sets up a business, usually as a wholesaler, and then defrauds other businesses by obtaining stock or goods, with the intention of evading payment for them.

Usually, payment for small initial orders is prompt. This will lull the supplier into a false sense of security with regard to the credit-worthiness of the company that it is supplying. The unsuspecting supplier will then be encouraged to supply a much larger order. When the goods are delivered they will either be sold off promptly, for whatever price they will fetch, or be re-directed to some other unknown location.

Whilst some fraudsters will operate this scam as a sole trader concern, most will be set up using a newly purchased "off the shelf" company, which can now be purchased for minimal cost. Directors' details supplied at the time of registration will inevitably be false.

Of course, most reputable suppliers will ask any new potential customer for trade or banking references. But how many will actually check out those references properly? It is quite usual for offenders in this type of fraud to either give details of another company under their control thus guaranteeing a good reference, or supply details of a legitimate supplier who has already been paid promptly for initial orders but who will inevitably fall foul of the fraud.

Premises where the goods are to be delivered are usually rented for a short term, and documentation used can be easily produced on computers.

Could your company be a likely target for this type of fraud?

Well, that depends to a certain extent on what commodity you trade in. The most likely targets are suppliers of goods that will have a quick turnover and can be easily disposed of, such as household goods, electrical items, toiletries, toys, fancy goods, etc, etc.