Dealing with fraud is an unfortunately prevalent part of doing business in the aftermarket parts industry. How much it affects your business comes down to how well you are educated on the types of scams in the market and how well prepared you are to identify and stop potential losses from fraud.
Here is a quick overview of some common scams and how we at ACTParts have been able to reduce our losses.
Stolen Credit Cards
Using information hacked from financial institutions, perpetrators are able to fool sales reps into thinking a sale is legitimate by providing a valid credit card number which authorizes for payment when entered. Once the real card holder disputes the transaction, the seller will be held liable for the total amount in addition to the cost of lost inventory.
Ways to protect yourself:
- Sales reps should demand a faxed copy of both the front/back of the card as well as a government issued ID
- Credit managers should verify the legitimacy of the card’s use with the card issuer before any transaction is finalized
Bad Checks
After demanding COD terms on a shipment, perpetrators will send a check for payment that turns out to be fraudulent. Next, they move the parts to a new location before the seller is aware of the fraud. Typically, criminals falling into this category protect themselves using multiple layers of freight forwarding to limit their exposure and maintain a veil of legitimacy.
Ways to protect yourself:
- Only award COD terms to customers with whom you have an established relationship
- Verify that the final destination of shipments is the same as what the customer specified
Shared Credibility (E-Mail Hacking)
After successfully hacking a company’s email and identifying key supplier relationships, perpetrators will send an email to the victim which appears to have been written by a trusted associate with instruction to re-route payments. Once the payments are received in the fraudulent account, they are forwarded through more layers of separation before finally reaching the perpetrator.
Ways to protect yourself:
- NEVER make changes to established payment details based solely on information obtained from email
- Regularly change passwords and follow basic security protocol
Things to Look For
Scams such as those described above will always come by way of a new account holder who is interested in parts such as fuel line items that are easy to store and cross over into many different types of machines. Stolen credit card scams usually aim to make a series of small orders due to the perpetrator’s lack of information regarding the card’s credit limit. This, however, is not true for all schemes involving a credit card. We have seen many cases where the credit card limit was known and the products sought were very expensive but still easy to store. COD scams, on the other hand, will attempt to purchase in bulk.
Why Does It Matter?
The success of fraud has a significant negative effect on the industry as a whole and not just the individuals and organizations directly impacted. Once the parts reach their final destination, they are put up for sale on the internet at deep discounts which creates a less competitive market for legitimate distributors.
Hackers and other criminals involved in the scams affecting our industry use the internet as a means of collaborating, refining their practices, and, most importantly, keeping their identities hidden. Little attention is being given to this issue from law enforcement agencies or financial institutions which leaves it to the individual organizations to stop losses. In order to do that, we will need to collaborate as effectively as they are in order to increase the risk for criminals wishing to defraud the hardworking people and organizations selling aftermarket parts for heavy equipment.
Click the button below to view samples of the fraud we come across at American Crane & Tractor Parts.
