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Types of financial fraud affecting SMEs: fake recipient scams

Sasha Karen
16 September 2016 1 minute readShare
A hooded man holding a tablet

Maintaining an online presence for your business has never been more important, but scammers can step in and create havoc. How can you be one step ahead of the fraudsters in a fake recipient scam?

According to Ryan Murtagh, co-founder of e-commerce platform Neto, financial fraud is an underestimated issue facing online businesses.

“I think a lot of start-up online businesses don't account for fraud, like a traditional retailer would account for someone shoplifting from their premises,” he said to My Business.

In a fake recipient scam, a purchased product is delivered to a specified address, with the scammer receiving the delivery.

“They will take delivery of the goods but it won't actually be their address, and by the time the merchant has got the chargeback, the goods are gone and the merchant obviously wears that chargeback cost and the cost of the products. And those have gone into the tens of thousands of dollars before the merchant's actually become aware of it,” said Mr Murtagh.

“Those have been predominantly in the electronic goods, fast-moving goods area – so computers, laptops.”

A hooded man holding a tabletMr Murtagh said SMEs should not ignore the threat of fraud, and should have a plan ready in case it does happen.

“Really [look] at the transactions, and every single transaction, and [go] through a checklist, whether that's automated or whether it requires human personnel to be involved.

“I wouldn't say it's difficult, because the tools are available, I think it's just about being aware and making sure that you have a strategy to counter fraud.”

According to Mr Murtagh, there are several ways to identify a fake recipient scam:

  • Compare the location of the customer to where their credit card was used during a purchase. If there is a large distance, this may be a scam attempt;
  • If a PO box is listed instead of a physical address, this may be a scam attempt;
  • If a free email account was used to place the order, rather than a paid-for email account, this may be a scam.

Each of the above factors may be negligible on their own, but when all three occur together, a fake recipient scam may be taking place.


Mr Murtagh has spoken to My Business previously about how online purchases have been getting easier.

Read about other kinds of financial fraud affecting SMEs:

Types of financial fraud affecting SMEs: phishing

Types of financial fraud affecting SMEs: fake recipient scams
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Sasha Karen

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