Issues from the User Forum:
|If corporate owners are misrepresenting the company financial position and I am aware of it, can I get in trouble?...
|Suggest a solution for this issue
|Post a question to other users
Preparation is key to making sure that a company is ready to handle a situation of corporate fraud. Businesses need to recognize that no matter how many things they may do to prevent it, nobody is immune to the possibility of corporate fraud, and they need to be ready to get the organization back on the right track should they become victims.
Of course, knowing how to handle corporate fraud first means knowing how to identify it. Fraud is a strange term that is used to include many different wrongs that may occur within a business. It can include systemic corruption, misappropriation, or even political wrongdoings. Among the most dangerous forms of corporate fraud is what is known as long firm fraud, which occurs when a business is founded on legitimate grounds, and is then lead by certain unethical individuals toward a purpose of defrauding over a long time. This does not mean that every person involved with the business is a part of the fraudulent activities, or is even aware that they are occurring. In many cases, it takes only a few key players to set things in a wrongful direction.
The business begins with a relatively legitimate purpose, because it requires a good credit history and strong relationships with their suppliers. However, once they are prepared with this foundation, they can begin making larger, and more wrongful orders and activities, ready to disappear once they receive the goods or the cash involved. Once they've taken off with the goods, they sell them among various different trading platforms.
Most long firm frauds take approximately two years to establish, run, and then close. This means that the entire operation can occur before legal action can be taken against them.
To avoid the risk of long firm fraud, make certain that any sudden large orders from a relatively short-term relationship are carefully dealt with and questioned - even if that company has been professional and fast to pay in the past. It is also prudent to investigate companies with whom you are building relationships, especially as their demands increase. Find out about the individuals heading these companies and find out if they have been connected with dissolved companies in the past, without any apparent explanation. It can also be discovered if the company has actually been in existence longer than its relationship with you.
By finding out as much as you can about the business, and applying the right amount of common sense, you prepare your company to protect itself against fraud. Remember that if something appears too good to be true, it often is.