Strategic Finance

Fraud worries as Insolvency Service plans to scale back

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Strategic Finance
Written by Gary Howes   
Tuesday, 27 July 2010

Opportunity for the less reputable to get away with fraud will be quickly exploited.

 

Equifax, is warning that organisations will need to do more thorough checks on potential customers and suppliers if plans by The Insolvency Service sees a reduction in investigations into rogue directors.  “It is widely accepted that fraud rises during a recession – so this news from the Insolvency Service could put more businesses at risk at a time when finances are already stretched”, explained Nic Beishon, Head of Equifax Commercial Information Solutions.
 

“The worry is that there may be a trend towards ‘serial phoenix’ companies - less reputable individuals creating  these businesses out of the ashes of failed entities more frequently – because they think there’s less risk of them being scrutinised. Plus there’s less chance of them being reported if their earlier victims don’t believe any action will be taken by the Insolvency Service.
 
“Being able to see the track record of the Directors of a business will, therefore, become even more important - using tools from the range of Equifax Business Reports.”
 
In particular, the Equifax Connections and Connections Plus reports will identify any discrepancies in company information, allowing an organisation to investigate further before deciding whether to deal with a business. 

In the Connections Plus report checks are made  - but not displayed – against directors Usual residential Address (URA) in addition to their public address. This is especially useful to spot the more unscrupulous traders who will go to considerable lengths to conceal a previous track record in order to gain new trade credit.
 
More than 30 individual database searches are carried out, cross referencing company and director information, including previous directorships, legal status, registered company numbers, postcode of business address and CCJs, to reveal any deliberate attempts to hide information.
 
“The Insolvency Service is clearly hoping that its plans to cut costs will not increase risk” continued Nic Beishon. 

“But I think we all have to be realistic that any opportunity for the less reputable to get away with fraud will be quickly exploited.  So it’s crucial that businesses do all the checks possible before they embark on new commercial relationships.”

 

 
 
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