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Originators in the commercial equipment finance and leasing industry are the eyes and ears of the industry - the front-line defense against unscrupulous activities. I have written many times on this topic and, once again, it is necessary to remind originators that there are always unscrupulous actors who try to take advantage of finance and leasing participants that are providing efficient access of capital to businesses. When the economy encounters new challenges, originators must take extra care to detect and avoid fraudulent activities. The following suggestions are provided after reviewing a few recent cases of fraudulent transactions.
- Follow your gut. If something doesn't feel right, probe deeper - ask more questions. Share your thoughts internally with others (especially the credit department) to confirm or dismiss your concerns.
- If a transaction requires cutting operational corners - be cautious. Policies and procedures were created for a purpose and workarounds invite fraud. (Complete that site inspection, don't waive that guarantor's signature so quickly, make sure all the documents are properly executed and complete.)
- If a relationship is too good to be true, or developed too quickly, or suddenly landed on your desk without any effort - then be careful. The best relationships are earned, not free gifts that fall from the sky.
- Many of the most sophisticated frauds include a vendor salesperson and end-user working together to commit fraud against an unsuspecting originator. Be cautious of a single salesperson that insists that you not speak to anyone else within the vendor operation or an employee of a large end-user that insists you not contact anyone else within his company.
The good news is that the vast majority (99%) of people are honest and attempting to fund legitimate transactions. However, it only takes one fraudulent transaction to create havoc throughout any organization. (Ex: One fraudulent vendor relationship erased more than half of a company's annual projected profitability and required significant internal resources to be reallocated to minimize the loss.)
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