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Financial Fraudster

How Financial Fraudsters Hide Their Details During Business Deals

There are some businesses and clients who do not truly know who they are allowing to control their financial accounts. We all like to think we have a keen eye when it comes to picking out fraudsters, but the fact is business owners and investors get tricked every day. We only have to think back to companies like Enron or people like Bernie Madoff to see how real professionals can get scammed for incredible losses to the company.

In this article, we will reveal a few different ways financial fraudsters hide details during business deals in order to help you defend yourself against these tricksters.

Creating a Fake Persona

People tend to trust others, and even more so when someone boasts how important and successful they are financially. The psychology here is that we believe successful people and are leery of those who are not. Regardless if the person is lying, we will accept them because we want to be connected with others who are successful. You have probably heard the phrase: “Fake it till you make it.” Many subscribe to just that and fake their way into your accounts.

Let’s take a look at how people create a fake persona of their success.

Fake Diplomas

One of the biggest scams happening in the workforce and getting others to think more highly of the fraudster is the fake diploma racket. Several websites are available online where anyone can pay a fee and obtain a business, economics, or any other degree they want. Of course, the degree is only as good as the paper it is typed on, but it looks official. With a convincing story, businesses get duped every day with the scam.

Fraudulent Bank Account Accrual

Somewhere on the dark web, there is a person who does not have the financial means or background to open a bank account. They are purchasing one from a college student for $100. This is one-way fraudsters are able to have access to a legitimate bank account to place funds they steal from you for a short period of time. After they take your company’s money in some phony deal, they then abscond with the cash and leave an untraceable link to the fraudster.

Phony Financial Reports

The more official something looks, the more people believe it. It is easy to create a financial worth statement on a document that appears to be from a bank or accounting firm. Business deals have been made around the world by fraudsters with only a piece of paper claiming their net worth.

Hiding Debt

There are dozens of ways to hide debt during a business deal. Some are outright fraud, while others live in a grey legal area. Here are some ways a company hides debt:

Synthetic Leases

A company purchases a building and then leases it back to itself. They then write down the lease as a cost but do not have to show the building’s purchase and the debt on its balance sheet.

Off-Balance Sheet Items

A company creates a separate business that incurs all of the debt. The other company shows all of the profit but none of the debt. If these companies are registered as separate companies, there is no obligation to show the indebted company’s financial records. This makes the other look as though it is profitable to investors and others during business deals.

Accelerating Revenue

This practice happens when a company takes payments for services in a lump sum for services that are spread over a number of years. Instead of dividing the money over the years of the contract, they will show the lump sum as profit for a shorter time period.

How to Avoid Financial Fraudsters

When it comes to avoiding financial fraudsters, the best way is to use the adage: trust but verify. Do not be enamored with the shiny dangling carrots, usually in the promise of profits, while the fraudster is setting you up for failure.

Business Deal

Another way to protect yourself during a business deal is to have a background check conducted on potential business partners. By using a company such as Affordable Background Checks to investigate the backgrounds of all of the parties involved, they can spot any past fraudulent activities. Your business is your and your employee’s livelihood, don’t trust it to anyone who has not been properly vetted. Contact us today to protect your company, your investments, and your future.

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Gavin Muirhead

Gavin Muirhead has been involved in developing products for background checks and improving online experiences in the background screening industry since 2012. He is the lead author and editor of Affordable Background Checks.