Don't Fall Victim to Frauds and Scams

Although this guidance was written specifically for a schools’ meeting it is applicable across all parts of the Authority.

It has been suggested this time around that we give a handout detailing the common types of frauds affecting businesses (and, therefore, feasibly schools) today. We have from time to time brought these types of frauds and scams to your attention, but this gives us the opportunity to actually collate all of these together into one reference document.

In a false billing scam, the fraudster sends a professional-looking invoice for products or services that were never ordered or received, hoping that it will be paid without further investigation.

This type of scam is usually aimed at larger organisations with a high volume of invoices payable, in the hope that smaller invoices will pass through unnoticed.   Characteristics include:

The best approach to combat false billing is to have sound accounting practices (corresponding purchase orders, delivery note reconciliation, system for budget holder(s) to authorise payment and confirm goods have been received).

A relatively common scam is where an invoice is received for goods ordered, but at prices in excess of those quoted (or indeed quantities invoiced in excess of quantities ordered / delivered). Organisations can fall into the trap of paying such invoices knowing the goods have been ordered and received, but failing to check that the prices invoiced correspond to the prices as per the original purchase order.

Again, the best approach to combat overcharging is to have sound accounting practices (e.g. a reconciliation between orders, delivery notes and invoices confirming prices and quantities received).

Beware of free items. If something seems too good to be true, it probably is! We have had several instances in Leicestershire’s schools where the schools have been offered (and have accepted) free printer ribbons, but where a large invoice is subsequently received for the products. In these instances, the schools have no record of the goods being provided on a “free of charge” basis and without any future commitment to buy.

Occasionally, companies will offer free items as a legitimate way of promoting their product. Schools should ensure in such circumstances that documentation is held supporting that the items are provided free of charge and with no further obligation on the school.

Unfortunately, pressure selling is a common tactic used by companies, usually tele-sales or sales person turning up on the school’s doorstep. Don’t be afraid to stand your ground, and don’t be pressured into buying anything. If the sales person becomes aggressive, attempt to obtain contact details and report the company to Trading Standards.

Again, sound accounting practices can combat pressure selling by ensuring that school policy is to only buy items that have been ordered beforehand by budget holders on official requisition forms.

A variant to the false billing scam. These scams are relatively common across our schools. They often attempt to obtain funds for placing an advert in a non-existent publication. Fraudsters suggest that a previous advert has been placed and that this transaction is a follow-up or a repeat. Alternatively, they can be attempts to sell space in a bogus or limited-distribution business directory. Whilst many of these transactions are not fraudulent (in the sense that the directory may well exist), they are deceitful, wasting both money and resources.

Our experiences are largely that schools are targeted during school holidays, invoices offer a prompt payment discount, and the addresses of the companies are often abroad (Czech Republic and Switzerland being common).

We have spoken in the past about companies, generally in the Lancashire / Cheshire area that have written to schools telling them that their Data Protection registration has expired and must be renewed immediately, at an extortionate cost. The names of these companies are often similar to that of the official Information Commissioner (e.g. Data Protection Agency Ltd.), thus giving a false sense of authenticity. Similar scams exist in other areas, typically with recurring annual expenditure (e.g. internet domain name renewal).

Schools are reminded that the annual renewal fee for Data Protection registrations is £35 and that the Information Commissioner is based in Wilmslow, Cheshire www.informationcommissioner.gov.uk Schools are advised to set up annual renewals by direct debit to combat this sort of scam.

‘Phishing’ is the term used for the practice of sending false e-mail messages to a wide audience (using ‘spamming lists’) in the hope that some people will reply to them.

‘Phishing’ e-mails are designed to look as if they come from a bank or similar organisation asking recipients to confirm their bank account details (including account numbers and online banking security information). They usually give a plausible reason for requesting such details – for example, to maintain an account.

Many ‘phishing’ e-mails do succeed, it is estimated at about 5%, with victims suffering identity theft and financial loss. One of the characteristics with such attacks is that the links provided in the e-mails go to false web-sites that look exactly the same as those they claim to be – even the address looks plausible (see pharming).

It is important to remember that no bank would ever ask customers to give such information in this way. A simple check would be to telephone your bank by a switchboard number or some other commonly known number and request more information.

Passing details of ‘phishing’ activity both to your bank and to the National Hi-Tech Crime Unit (www.nhtcu.org/) can help to reduce the impact of these scams.

Not a new scam, but has been given a name in recent months. This is a very serious variant of “phishing” but where the victim doesn’t do anything rash. He or she intends to visit a financial website, but is unwittingly redirected to a bogus website that looks just like the real thing, but just exists to “harvest” their details. The giveaway is that the web address at the top will be slightly different from that of the official site.

Not much to say about making payments in advance, other than to be cautious. Standard commercial practice is to make payment after receipt of goods or services. Occasionally, payments in advance are unavoidable (e.g. cheque with order items). Take reasonable steps to confirm the validity of suppliers. As a general rule, making payments in advance is discouraged. After all, you may never receive the goods!

Passing-off occurs when somebody represents their goods and services as the goods and services of somebody else. No-one is entitled to steal another’s trade by deceit, and passing-off is a criminal offence.

Passing-off can occur by somebody adopting the same or similar trademark as another’s, the same or similar get-up or appearance of the product or services as another’s, or by implying to the public that their product and service is somehow or other connected with the other’s when it is not.

Many schools appear to have been targeted in the past by a company in the West Midlands area selling telecommunications equipment with a name very similar to that of British Telecom and using a tactic that left the school in no doubt that the company was purporting to indeed be British Telecom. This is a legitimate company selling a legitimate product (and perhaps even a perfectly good product) but doing so by deceitful means.

Also, think twice before giving information to unknown parties. For example, some fraudsters pretend to be charities (often using names that seem close to real organisations) and ask for bank, credit card details or donations.

Although rare, a handful of Leicestershire schools have been targeted in the past. Here, cheques are intercepted in transit and the payee and/or amount amended. This is a hi-tech crime and applies to both manual and computer-generated cheques. A hard crime to prevent, although schools using computer cheques should confirm with its stationery providers that the cheques they use are technologically developed with an aim of reducing cheque forgery.

Regular bank reconciliations would detect the crime, although in at least two of the instances we have come across, it was the vigilance of the bank staff that stopped the cheques from being processed in the first place.

Forged banknotes have always been a problem, although surprisingly they turn up in our schools pretty irregularly. Schools should be vigilant when receiving banknotes. Equipment such as ultra-violet watermark detectors or pens can be purchased relatively cheaply. Beware large payments made in banknotes (e.g. lettings), banknotes of large denomination (£50s), and unfamiliar currency (e.g. Scottish). The area’s local Police Crime Prevention officer will often be able to provide useful advice on identifying forged banknotes.

Advanced Fee Frauds often (but not exclusively) originate from parts of Africa. Nigeria is notorious for this type of scam, so much that AFFs are often called ‘419 Schemes’, after Section 4.1.9 of the Nigerian penal code. Common characteristics of an AFF scheme include:

Simple common-sense should tell you to ignore such correspondence. However, some people (and indeed some organisations) have fallen for this scam.

We have issued advice on several occasions in the past on the risks of internet ordering. Remember to use only reputable suppliers. The dangers of payment in advance are discussed elsewhere in this document. The LCC web-site contains useful ‘best practice’ advice on internet ordering.

Be careful when performing financial transactions on-line. Do as much as you can beforehand to ensure that the web-site is genuine; check that the company has a secure site (e.g. a closed padlock) and look for information about the security protection the company has put in place. Further information about shopping on-line, and a host of useful downloadable factsheets, can be found on the DTI’s Consumer Direct website at www.consumerdirect.gov.uk.

One of the common frauds in society is the use of stolen credit or debit cards to pay for goods or services. Schools are starting to use purchasing cards (e.g. NatWest Onecard) to facilitate internet purchasing. It therefore is an appropriate time to remind schools of the need to keep the card (and the number) secure at all times, controlled ideally by just one individual. In the event of a card being stolen, the card should be cancelled with the card issuer at the earliest opportunity (most banks have 24 hour emergency lines). Schools should have a record of the bank’s emergency number close to hand.

We have had instances in the past of salesmen turning up at schools saying that they have some surplus carpet for sale at a knock-down price (n.b. the “knock-down price” is always a giveaway!). The story is generally plausible – “just finished a large job in the area and have some carpet left”. Subsequent tests for fire resistance proved the carpets to fail to meet with British safety standards.

We can only reiterate that if something seems too good to be true, it probably is!

Similarly, Leicestershire schools have been targeted by travelling salesman offering to tarmac school drives, playgrounds etc., usually using a quantity of material left over from a job in the neighbourhood. Our experiences of this have been that the workmanship has been unsatisfactory, and the contact numbers on the invoice false when the school has attempted to seek redress.

Occasionally schools receive correspondence of many types asking schools to call telephone numbers which are evidently “premium rate” (e.g. if you wish to unsubscribe to this service, please call 0900 … or whatever). Variants are the “you have won a prize” type correspondence.

We don’t know why, but the majority of ‘dodgy’ companies that we get told about by schools are in relation to the purchase (and lease) of either telecommunications systems or photocopiers. Previous experiences suggest that offers are not always what they seem, and schools are advised to read the small print of contracts carefully before committing to them. The Legal Section at County Hall will happily give advice on contracts should schools wish. Additionally, ESPO buyers can advise on these products, and generally know of other products that are commercially competitive and often less risky.

Beware of correspondence received with a tragic story to tell (e.g. child dying of an incurable disease who is collecting business cards, letter heads etc. with a hope of getting into the Guinness Book of Records). These can lead to identity fraud with the perpetrators using the documentation for any manner of fraudulent activity. Variants might be requests for (typically small) amounts of money to send the child to Disneyland, or wherever. A common misconception is that fraud is generally attempting to misappropriate significant amounts of money. Indeed, the chances of a fraud being successful, we’d suggest, is where the amounts involved are typically small.

This said, it would be prudent to reject any such requests with a certain amount of compassion. After all, they may be genuine!

 

Fortunately, instances of such frauds and scams affecting our schools are relatively rare. This said, they do happen from time to time and it would be extremely naive to think that you will never be subject to one (or more) of them at some point in time.

One of the most effective ways of combating commercial fraud is to keep the subject in the limelight, and therefore we make no apologies for “going over old ground”. A crucial part that schools can play is to ensure that, where frauds and scams are perpetrated (or simply attempted), these are reported to the relevant bodies. Schools can use the medium of the weekly Education bulletin to pass on warnings (via ourselves) to other Leicestershire schools. Similarly, you may be part of other working networks (e.g. Upper Schools’ Bursars, Development Groups, Families of Schools) which give you a further outlet to publicise any warnings that you may come across.

Just out of interest, the internet provides a useful resource on such criminal activity. By putting “common scams” into an internet search engine returned 74,000 results! A particularly useful web-site containing up-to-date advice on this subject is provided by the Department for Trade and Industry (DTI) at www.consumerdirect.gov.uk

Finally, apologies for paraphrasing Nick Ross and the Crimewatch team, but please don’t lose sleep over this. We wouldn’t tell you if these issues weren’t important, but they can by and large be prevented through the vigilance of school finance staff.

 

Trading Standards (Regulatory Services):- (0116) 265 8000 – trading-standards@leics.gov.uk

Head of Internal Audit :- (0116) 265 7618 – finance@leics.gov.uk