Overseas Scam Currently Targeting Commercial Collection Agencies

A commercial debt collection agency in New Jersey revealed to insideARM.com that it is currently the target of a scam that operates much like advance-fee cons. Originating from overseas, the scheme appears to be targeting high-balance account recoveries most often found in the commercial sector.

On Thursday, September 27, GB Collects LLC received a check for $650,000 that would have satisfied a large account assigned by a Japanese electronics distributor. Rather than being the end of a typical debt collection effort, the check actually confirmed the suspicions of GB Collects President George Bresler.

“We’re all in this together,” Bresler told insideARM. “I think it’s very important that other commercial debt collectors hear about this deception as it is happening.”

It all started about a week ago when a GB Collects sales representative received an email that appeared to be from Sanwa Electronic Instruments Co. Ltd., an electronics manufacturer and marketer based in Japan. Sanwa needed help collecting a $650,000 debt from an American electronics store that happened to be located near the GB Collects offices.

The sales rep was understandably excited at the prospect of a $650,000 account simply dropping into his lap. He did a quick search online for Sanwa and the company checked out. It really is an electronics company based in Japan. He searched for the American company named as the debtor, and sure enough, there it was, just miles from his office. So he replied to the email and engaged a Mr. Seiichi Nagai, who claimed to be Sanwa’s VP of Marketing. The sales rep had a few questions, naturally, for Mr. Nagai.

Two days later, Nagai responded. He answered some questions, but not all. More importantly, he forwarded all of the information available on the account and asked for a formal agreement to be sent so GB Collect could begin its recovery efforts. Included in the message were invoices, a past-due notice sent to the debtor, and a signed purchase agreement.

But some red flags immediately went up. First, the amount to be collected was exactly $650,000, on an invoice of nine separate products (all also priced with suspiciously round numbers). Second, the email from Mr. Nagai came from a Gmail account, not a corporate address at Sanwa.

After doing an Internet search of the product numbers in the invoice, Bresler discovered that they came from an online invoice design firm. In other words, the purported “client” had simply cut and paste a sample invoice from a company that sells invoice design services. The final clue was that the date on the purchase order did not match the one on the invoice. In fact, it was off by a full year. Someone had inadvertently entered 2011 on the purchase order instead of 2012.

The collection agency immediately determined the whole thing was a scam and set the file aside. Everyone involved was content to just let it go and not think about it again.

But a week later, on Wednesday September 26, “Sanwa” sent back a signed copy of the collection contract along with an encouraging message to “go get them.” The letter was simply added to the file and dismissed.

The next day, the check arrived.

Bear in mind that GB Collect had engaged in absolutely no collection activity. It never reached out to the debtor: no phone call, no letter, nothing. But here was a check for the full amount ($650,000) drawn on an account from Scotiabank in Canada. Scotiabank, of course, is a very real bank. In fact, the address on the check matched one of the bank’s offices in suburban Toronto. But again, there was sloppiness. The letter asked GB to email an “account manager” with Scotiabank when the company deposited the check; the email address was a generic web-based one, not a Scotibank corporate account.

Bresler then knew that he had to do something. This had grown from an intricate phishing-type scam to one involving check and wire fraud. He also knew he had to let other commercial debt collection agencies know what was happening.

“People could get taken on this one,” said Bresler. “The client and debtor actually check out initially. And since the invoice and all other supporting documents go to one department (sales) and then the check it sent to another department, that check could get cashed before someone realizes what happened.”

As with most advance-fee scams – also called “Nigerian scams” – the true goal here was to get the company to deposit the check. In complicated forgery cases, checks can be initially accepted by a bank because they look authentic. A short time after the check is deposited, the scammer will ask for some or all of the money back (in this case, it would have been remittance for the debt). The victim pays out very real money from their accounts. But weeks later, when the bank realizes the check was a forgery, the money is deducted from the account, leaving the victim with no recourse.

The set up of the scam is very similar to one insideARM.com covered a few years. In that operation, commercial collection agencies were also targeted, most likely due to their comfort working large-balance debts.

Bresler urges the commercial debt collection industry to be diligent for the time being as he suspects his was not the only company targeted by the con.

“Our internal controls are tight, and there is no way this would have gotten very far in our process,” he said. “But the intricacy of the whole thing worries me that others might not be so careful and could find themselves out of a lot of money.”