All You Need To Know About Corporate Fraud

Corporate fraud in terms of criminology refers to crimes or fraud that are either committed by the corporation or by individuals that manage those corporations. If the crimes are committed by individuals who are associated with the corporation or a business entity that represents the corporation, they will also be classified as corporate fraud. Here, 'corporation' refers to a business entity that has its own personal standing in the court of law and is different to the persons who manage its activities.

Company Identity fraud, Long Firm fraud and the Phoenix companies' fraud are the three most common types of company fraud witnessed these days. This fraud not only affects the individuals who invest in these corporations, but also affect the employees of the corporations and the business entities that deal with these corporations.

Company Identity fraud is the simplest corporate fraud to understand and commit. It is similar to personal identity theft in all ways, except for the fact that here a clone corporation is created. The trouble with detecting Company Identity fraud is that the fraudster may change the trading address, the registered offices and even the names of director of companies without anybody being any wiser to this fact.

The register of companies would have no option but to accept the given documentation at its face value, since the applying director of the clone is an official director of the company and the registered offices of the cloned company are similar to that of the original corporation. In addition to all these troubling facts is that any search related to the credit rating of the cloned company will always display an above average or a healthy credit rating.
So, the fraudster can deal in the company's name without a chance of getting caught.

The other business entities think that they are dealing with the original corporation and keep on supplying goods and services, as they have no reason not to. There are seemingly two victims in this case, the company that is cloned, and the company that provides services to the cloned corporation. Both these companies pay for the fraud indirectly through insurance premiums and high production costs.

The second most common type of company fraud is Long Firm fraud. Here, a legitimate business is set up with the intention to defraud at a later stage. It generally starts with establishing a decent credit history by placing numerous soft orders with wholesalers and ensuring they pay promptly. When they have established sufficient trust, the fraudsters place a large order, default on the payments and make away with the goods.

Phoenix companies' fraud is the third most common type of company fraud. This is where a director or group of directors set up business entities and then wind them up while owing substantial amount of money. They set up another company with the same name and in the same field, while the original companies go bust. The directors have no responsibility to the old company and they work on the new one with no negative impact on growth or production.