When we think about people being scammed out of money, the first thing that comes to mind is older people who may be vulnerable, technologically challenged or just plain gullible.
But it’s not just individuals that get conned out of money, it happens to businesses all the time. And it happens to small and large businesses alike. Even large businesses, with lots of internal processes and checks, can fall prey to swindlers and fraudsters.
Small and micro businesses are often prime targets for certain types of fraud, and one of the most common ones is the overpayment scam, or sometimes referred to as the refund scam.
In this scam, a company will be contacted by a fraudster posing as a new customer about buying products or services. It is usually not a massive deal that would raise too much suspicion, but nice enough with some potential future business. The scammer will usually call from a mobile phone and say that they are traveling and not in the office, and therefore only available on mobile phone. They may even claim to be from a legitimate company, but again will insist that you don’t call them at the office because they are not there.
Often there is a sense of urgency to the deal, for example the swindler may claim that they have been badly let down at the last minute by their existing supplier, and that if the business can help them out now they can have all their business going forward.
They will then ask for a quotation, and ask for the payment details at the same time, so that the “office can start loading you on the system for payment”. They will usually not use any kind of business email account and will ask that the quotation is sent via phone messaging app, or to a gmail account, claiming that they are not able to pick up their office email while they are traveling, or that “their server is down at the moment”, or some such very normal sounding reason.
The scammer will then call back and say all is in order, and that they will go ahead with the purchase and will send the proof of payment soonest.
Now, if payments are sent and received within the same provider or bank, payment normally reflects immediately. However, between different banks and different providers there is usually a delay of between 24 to 48 hours, even more if it’s over a week-end. The proof of payment will always be from a different provider
Some time later, the scammer will call back in a total panic, saying that a terrible mistake has been made and that they have overpaid by accident. They will send through a proof of payment for much more than the original payment amount. They will then send through their payment details and put intense pressure onto the vendor to refund the excess immediately, usually saying that they will get fired if their boss finds out what has happened.
The small business will look at the proof of payment, see that there has indeed been an overpayment and then refund the difference into the account that the scammer provides.
However the proof of payment will turn out to be fake, and there was never any money deposited into the sellers account at all. It was simply a scam. As soon as the seller has transferred the money, the scammer’s phone will be disconnected and they will never be heard from again.
The scammer relies on the goodwill and kindness of the seller, as well as the promise of future business in order to make this scam work.
What are the red flags to look out for in this scam?
- The buyer seems in a hurry to buy
- The buyer insists on communication by mobile phone or messaging app only
- The buyer does not provide a legitimate business email address, only a gmail or other free account
- The buyer asks for documents to be sent to a phone app or free email account
- The buyer seems to make payment very quickly and sends through a proof of payment for an inflated amount
- The buyer very quickly insists on a refund before “they get fired”
- The destination of the refund account may not be an actual bank account but perhaps an e-wallet or cash/payment app
- The buyer can get very aggressive about the refund if they sense hesitancy on the part of the seller
Never provide a refund until you can confirm yourself that the funds have actually arrived in your account. If the situation is legitimate, any other business person would understand having to have to wait for a refund. Don’t allow a “customer” to bully you into a bad decision that you will regret.
Always look closely at the proof of payment that the buyer sends, call providers and check reference numbers.
At Baer’s Crest we know the challenges that small businesses can face, and we know that all deals look attractive and authentic at first glance. But we also know that there are bad actors out there who have no problem with trying to swindle small businesses out of their hard earned money. When you partner with Baer’s Crest for your payment needs, you can rest assured that we have excellent security systems in place to help you verify legitimate transactions, as well as deal with any refunds or chargebacks that need to be made. Talk to us about payment solutions that work for your business.