Exclusive report: The NACFB clamps down on advance fee fraud

Exclusive report: The NACFB clamps down on advance fee fraud

Following numerous reports of suspected advance fee fraud from brokers and SMEs, early last year the NACFB took the step of forming the Fraud Intelligence Committee to and, if appropriate, forward them to the relevant authorities.


Chief executive of the NACFB, Adam Tyler, gives an update on the progress made:  


Way back in the mists of time (well, 1992) the NACFB was formed by a group of like-minded brokers who were concerned about advance fee fraud, and the damage a few disreputable fraudsters were having on the reputation of the whole industry.


A code of practice was devised and written for members to adhere to and, in addition, if the service level offered by a member fell short of the customer’s expectations, there was somewhere they could go to complain and expect a thorough investigation into the conduct of that broker member.


Advance fee fraud was perpetrated by a few crooks; they would promise a customer an excellent finance deal, relieve them of a few hundred or thousand pounds by way of an upfront fee, and then fail to produce any kind of loan.  At the time the damage this kind of activity had on the lenders’ and public’s perception of the commercial broker industry as a whole was enormous, and the industry’s reputation took a long time to be repaired.


Since then, the NACFB has been successful in kicking advance fee fraud out of the industry, but unfortunately 2009 saw a big increase in reports of this kind of scam.


So why, after several years of peace and quiet, have these practices resurfaced?


The simple answer is: because of the recession. Because legitimate lenders are still very reluctant to do any actual lending, SMEs are becoming more and more desperate to find some sort of funding. And it is this desperation which makes them vulnerable to a ‘lender’ or ‘broker’ who promise that they can find the money they need. So desperate, in fact, that they are happy to part with large sums of money when a quick Google search would have revealed the word ‘scam’ inextricably linked to the company’s name.


Interestingly, the credit crunch itself has also proved to be an effective way of hiding the fraud. Because legitimate lenders are still playing a bit of a smoke and mirrors game: claiming to be ‘open for business’, while in many cases looking for reasons not to do a deal; brokers and their SME clients are less likely to question a fraudster who has turned them down. Everyone knows the problems lenders are having, so having a lending request turned down – even after significant fees have been paid up front – is just accepted as the norm in today’s market.


Now it does appear that the fraudsters, although prolific, are fortunately few in number. As the incidents reported to us increased, certain names cropped up again and again. A log of all reported incidents was kept in preparation for the day when the files would be handed over to the relevant authorities and so we could point any future enquiries in the right direction.


An additional difficulty was simply ensuring that those firms who we suspected were in fact fraudsters were not tipped off in any way about our suspicions. It was a fine line to tread as many of those who had lost money were, justifiably, angry about what had happened to them. In addition, without being able to ‘name names’ it is extremely difficult to warn introducers about the dangers of an ill-researched introduction.


Finally, after over 12 months of work; compiling files of evidence, speaking to victims, and also trying to warn introducers about the possible dangers which could lurk behind a professional looking façade, the details of all the cases, along with some background information on how the industry works, have been handed over to the National Fraud Authority, who are now investigating. 


The ultimate plan for the Fraud Intelligence Committee was always to work as a conduit between the SME or introducer, and the relevant authorities, until a case built up enough of its own momentum for us to step out of the proceedings altogether. Action Fraud can be contacted through the Action Fraud helpline 0300 123 2040 or via their website, and now this is where we will be pointing anyone who makes a report to us in the future.


For more information about Action Fraud, please visit their website: www.actionfraud.police.uk

If you feel you or one of your clients may have been a victim of one of these scams please contact Action Fraud directly on 0300 123 2040.

To find out how you can protect against fraud, visit Action Fraud's prevention library. 


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