There are a number of actions you can take to research potential business partners met on the Internet. These actions can reduce the risk of you being subjected to fraudulent transactions or business misunderstandings.
Confirm contact details
Always confirm if the address, phone number and email address given to you by your trading partner belongs to the same company. If a trader provides inconsistent contact details, for example an address in the USA and phone number from another country, we recommend you look up the address in the local phone directory, obtain the local phone number, and call this number to confirm that the person you are in touch with actually works for the company. Similarly, if a partner's email heading states that they work for a certain company, you should verify this. Be aware that some scam artists alter their return email address heading to make it look like they work for a company when, in fact, they don't
Check the partner's background
Background checks from independent third-party sources include a search for legal registration and credit reports. In many countries, the existence of a company and its legal status is a matter of public record. Check the company’s registry in the partner's country to ensure that the company exists with a valid registration. If you cannot gain independent access to your partner's registration information, ask your partner to provide you with a Certificate of Good Standing issued by the company’s registry office in his/her country or state/province. You can also gain further knowledge about your partner by ordering a credit history report from a local credit agency. Credit history reports contain information about the partner's business history in their relationships with banks and other trading partners. Contact credit agencies that can provide credit history reports.
Meet your partner in person
Whenever possible, meet your business partner in person and visit their company's facilities. While the Internet offers you a wealth of information on your potential partner, that enables you to make an initial assessment, there is no substitute for face-to-face contact.
Protect yourself when ordering or providing samples
Buyers should order a sample before committing to a purchase order to be sure that the product meets their expectations. Sellers should request payment for a sample and/or payment for shipping costs before you send out the sample, especially if your product has a high resale value.
Use pre-shipment inspection services
If you are a buyer, you can protect yourself against poor quality by ordering a pre-shipment inspection of the products. You can demand the inspection as a condition of payment. For additional information, go to: Bureau Veritas Group at: www.bureauveritas.com; Intertek at: www.intertek.com and SGS at: www.sgs.com
Protecting yourself against payment risks as the seller
If you are a seller and have not been doing business with your partner for very long, avoid selling your products on open-account (in which case you are extending credit to your buyer). Instead ask your buyer to open a letter of credit (L/C).
Protecting yourself against payment risks as the buyer
If you are a buyer, sometimes a supplier may ask you for a deposit (usually 30%) before they accept your order. While this is not unusual between longstanding trading partners, if you are doing business with the supplier for the first time, make sure you have done sufficient background checks on the supplier before you agree to the deposit, or ask for a different form of payment, such as a letter of credit. If the seller seems more focused on payment than any other issue or indicates that cash payment must be made urgently, more caution should be given to the transaction. Be extra cautious when the seller asks you to send money to an account whose real owner cannot be traced: for example, you cannot trace the real name of the person behind an account with a wiring service such as Western Union.
Suspect shipping or contact addresses
Pay close attention to shipping or contact addresses located in regions with high reported incidences of online fraud, such as Eastern Europe, Western Africa and Central America.