Mandate fraud - do not be caught out!

The independent prep school, Kingshott, has become the latest victim of mandate fraud. In this case, the fraudsters assumed the identity of the construction firm that had been working at the school in recent months.

The fraudsters simply mocked up the construction company’s letter head and used that to inform the school of a change in bank account details. The school processed the request and sent a payment of £240,000.

Recovery from this kind of fraud is extremely difficult. In the case of Kingshott, the school will have to suffer the £240,000 loss; and their only means of recovery is the arrest and prosecution of the fraudsters.

However, locating fraudsters of this ilk is problematic. Fraudsters will move the money between various accounts, very quickly, making it extremely hard to trace the money and identify the perpetrators.

Fraudsters committing mandate fraud rely on creating trust between themselves and the individual within the target company. In previous instances, it has been known for fraudsters to assume the identity of a main supplier for several months (in order to build trust) before requesting the change in bank account details.

Mandate fraud’s modus operandi has evolved of note is the 'fake president' fraud. Much like mandate fraud, the fraudster will assume an identity, but this time it will be that of a President, CEO, CFO or other executive of the company they are targeting. The fraudster will instruct a member of staff (within that company) to complete certain transactions urgently. Victims of this fraud are usually companies with either many subsidiaries, or companies that have a wide geographic footprint with many regional offices.

How can we stop it from happening?

In order to protect yourself from fraudsters attempting to commit mandate fraud, please remember the following guidance:
  • all changes to key contacts should be verified with the outgoing key contact and verified with the supplier’s senior management team (via the main switchboard);
  • no important instruction, such as payment, should be given by telephone or email - they must all be made in writing on letter headed paper with a follow up telephone call to the key contact (via the company switchboard);
  • you should confirm who is making the request to change bank account details;
  • you should always verify changes to financial arrangements with the organisation directly using established contact details you have on file;
  • you should check the supplier history e.g. have they requested any other changes to their standard data? Are they a high transaction supplier?;
  • if the request has been made in writing, check the letter head against those you have on record;
  • be careful not to volunteer private or confidential information, such as supplier numbers and details;
  • if you are concerned about the source of a call, inform the caller that you will  call them back using established contact details you have on file.
For more information please contact John Baker.

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