PARTICIPANT FRAUD AND HOW TO AVOID IT

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PARTICIPANT FRAUD AND HOW TO AVOID IT
It is impossible to recommend universal methods that reliably protect partners from fraud, due to the variety of types of fraud and fraud. But the most important are the following methods of protection against fraudsters:

· Do not rush to part with your own money. Try to pay for the goods only after they are delivered to you. In an extreme case - issue a letter of credit with favorable conditions for its disclosure for you (after delivery of the goods).

· If you have conducted one or two small transactions with a new partner, do not assume that a third, large transaction will be successful. Especially if, when making a major transaction, your partner will manage your money.

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· When concluding a joint venture agreement, provide for your mandatory participation in all major joint venture operations, your tight control over the expenditure of funds and the distribution of income.

· The contract clearly stipulate your economic interests. If the contract is not fulfilled, under the terms of the contract, seek to get the maximum compensation.

· Be careful if you are offered extremely favorable contract terms.

· When concluding contracts for the purchase of goods and their sale, control the stipulated amount of penalties received and paid in case of failure of the contracts.

· Be sure to read the charter of the partner company. Find out if the company has the right to engage in the activities stipulated by the contract under the charter. Check if the director has the right to conclude an agreement with you without the consent of the senior management. If the partner refers to reputable founders, check this in the memorandum of association. It is also very useful to familiarize yourself with the balance sheet of the partner company.

· Check the passport and the authority of the person signing the contract with you, as well as the coincidence of the name of the partner company in the text of the contract, in other documents and in print.

· The text of the contract should not contain references to the obligations of other legal entities and individuals, except for those who signed the contract. You must be especially careful if the contract is concluded on behalf of a well-known company, and money is sent to another company (even if the latter calls itself a subsidiary or regional representative of a well-known company).

· Check the provided collateral for possible multiple re-mortgaging.

· When providing you with guarantees (guarantees) of other enterprises or organizations, check the viability of the guarantor (guarantor) and find out whether he even gave you a guarantee.

· In invoices, in the acts of acceptance of work and on invoices, always check the conformity indicated in the documents and the actual quantity and quality of the delivered goods, as well as the volume of work and services performed.

· Control your employees, do not create conditions for them when they can be “resold” to another company.

Source: Entrepreneurial Encyclopedia: Practical Recommendations. edited by Vladimir M. Mikhailovich Emelyanov, Doctor of Economics, Moscow: Buk #press, 2006.

 

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JOINT ACTIVITIES WITH DISTRIBUTION OF INCOME BY HALF

JOINT ACTIVITY WITH DISTRIBUTION OF INCOME BY HALF
This type of fraud is used when two companies agree to conduct joint activities.
One of the parties is obliged to provide money, and the other side is to conduct a commercial operation and receive income. They decided to distribute the earned income after deducting expenses in half according to the principle of Shura Balaganov (“honestly, comrade Bender, honestly”).

Commercial operation completed, income received. But the party that made the commercial operation claims that the costs were significantly higher than planned (they had to pay more to the intermediary, for transport, customs and sanitary and epidemiological station increased fees, etc.). It turns out that there is especially nothing to share. Each party receives a small income. The partner who gave the money understands that he would have received, without any risk, much higher income if he had put money in a bank on deposit. He vaguely suspects that his partner has overestimated the costs, but cannot prove anything. The partner, on the other hand, paid commissions to the intermediary, whom he himself established, paid more for transport and took intermediary interest from the transport organization. Bribes to customs, sanitary and epidemiological stations and other similar organizations are always made in cash, and it is extremely difficult to control their value. There are other ways to increase costs. Therefore, we recommend that the partner, who gives money and exercises only general control over the transaction, stipulate a certain annual percentage of income from invested money. Perhaps in this case your partner will earn much more. But if you decide to divide the received net income in half, most likely you will receive even less than if you specifically stipulated and recorded your percentage of income in the contract.

Source: Entrepreneurial Encyclopedia: Practical Recommendations. edited by Vladimir M. Mikhailovich Emelyanov, Doctor of Economics, Moscow: Buk #press, 2006.

 

[Матушкин Андрей Николаевич]

Thank!