How factoring fraud takes place
Barry Faudemer, 02 June 2021
Cash-strapped businesses grappling with the cost of the pandemic are increasingly securing loans against the value of unpaid invoices, or ‘factoring’ as it is often referred to.
However, such a trend is also proving irresistible to criminals keen to exploit the opportunities of this growing market. Factoring fraud is a fraud committed against a debt factoring company by one of its customers.
The recent announcement that the Serious Fraud Office is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance, including its financing arrangements with Greensill Capital UK, (which specialises in supply chain finance) is a timely reminder that lenders need to be alive to the pressure now placed upon businesses emerging from the pandemic and desperately seeking cash to simply keep their businesses going.
So, what is factoring fraud and, more importantly, how can it be prevented? In its most basic form, factoring fraud is a fraud committed against a debt factoring company by one of its customers.
The aim of the fraud is to obtain money from factoring fictitious debtors, by forwarding false invoices to the factoring company. The fraud can be perpetrated in several ways.
