4 Tips for How to avoid Payment and Supplier Fraud in China

Payment Fraud Risk

Afraid of losing (all) your money when you’re importing from China or other countries? You should be, and you’re not alone. Payment frauds are one of the most common forms of scam, and they are targeting small to medium-sized businesses sourcing products on Alibaba.com and other online B2B platforms like Made-in-China.com etc., some times it calls Alibaba scams

In the last few years, not fewer customers asked AQI Service if we can help them to get money back from their supplier since they got no message back from the supplier after they sent the deposit. Small importers losing hundreds of thousands of dollars in this type of scam.

Payment and Supplier Fraud

One of my friend told me the story: he got a phone call from his customer, in order to update the bank account in system, he was requested to stamp on his new bank account and email it back. my friend was super surprised that he didn’t send any revised bank information to customer,

When customer forwarded the email with new bank account, he found the email was exactly sent from his email box, and it was communicated with customer for a few times, but he totally doesn’t know it.

He was scared because the payment can up to half million dollars.

That’s the situation why sometimes client said they paid, but the supplier said they didn’t receive any money because somebody inside is a professional scammer, possibly even part of an organized crime network.

The scammers were to hack the supplier’s email account, check the sent box and then replace the beneficiary, the bank account number, and the SWIFT code. The next thing they do is to resend the invoice, often together with a simple excuse for sending the same invoice twice.

The client did what most small importers would have done in a situation like this – she paid the invoice. my friend’s client didn’t pay it because their accounting requests a formal document, but most of the importers just pay it as soon as they received a proforma invoice.

As part of our Supplier Screening service, we always verify both the supplier’s business license and bank account details, before you place an order.

How to prevent this type of payment fraud

The payment fraud won’t be disappeared all the time in the process of importing, where ever import from the world. you should have some common sense to prevent payment frauds when importing from China or Asia will be easier if you follow below rules:

1. NEVER pay to a bank account where the beneficiary name does not match the company name of the supplier you’re buying your products from
2. NEVER pay to a bank account that’s registered in a completely different city, province or country than the supplier you’re buying your from
3. Ask a third party in China to help you verify why your supplier changed the bank account
4. Request your supplier to give more information on why the bank account been change

Let’s back to my friend’s case above, why the scammers can hack into his email account without any alarm, even the hacker communicated with his client in few emails via his account, he can’t see them too, he complaint the issue to email server, but the company only replied him that Technicals will go check for it.

My friend doesn’t expect any reply because the mailbox is a free account, he also has no idea the email security, we suggested him to upgrade the email security, change new password, and not to use the free account to be business account anymore.

Deal with trading companies for different bank accounts.

Many Chinese trading companies request payments to bank accounts that are not operated by their company. It’s very common that suppliers in China’s southern Guangdong province have several offshore companies in Hong Kong, often owned by the Legal Representative or a relative of this person, have you met before like this?

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