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Homework answers / question archive / Credit managers throughout the United Kingdom have reported that there has been an increase in "long firm" frauds in the last few months
Credit managers throughout the United Kingdom have reported that there has been an increase in "long firm" frauds in the last few months. This type of
fraud was created by the Kray twins in the East End of London in the early 1960s and was the mainstay of their criminal empire. These types of frauds are generally run over a "long" period thus the first part of the name. The second part of the name comes from the Kray's gang who were known as the "Firm". A "long firm" fraud is where a fraudster sets up a business and pretends that they are a bona-fide trader who will pay accounts on demand. This induces manufacturers and wholesalers to supply goods on credit when in fact there is no intention to make payment. The fraudulent concern is normally a limited company that has been purchased online from formation agents. The company is registered with Companies House with the directors being bogus often lodging false accounts to show a couple of years of successful trading when in fact the company has only been trading a matter of weeks. In other cases sole trader or partnership businesses are used for the scam.
Any marketable commodity can be the subject of fraud although certain goods are preferred because they are not easily traceable. Toys, toiletries, wines & spirits, fancy goods, confectionery and building materials all have a quick turnover and can be disposed of easily. High value audio/visual products, computer products/components and peripherals printer cartridges, mobile phones, furniture and high-class merchandise including clothing, branded accessories and sports goods are often the subject of these frauds too. It is fairly apparent in a number of cases that the fraud has been executed with a specific shopping list in mind to cater for the demand from existing outlets.
The fraudsters visit Trade Shows throughout the UK and Europe with a view to opening accounts and obtaining goods on credit. Telephone sales have increased dramatically over the years due to constraints on all businesses to deliver quickly and move the business forward and fraudsters have taken full advantage of this. They also use the internet as it removes direct contact with the supplier and the traditional benefits of customer contact - i.e. speaking to an individual who sounds unprofessional, or who does not understand the product and price relationship. The size and type of premises they operate from will depend on the quantity and category of goods and services to be handled. With goods that turnover very quickly such as beer, wine, and spirits, all that is needed is enough room to unload. In most cases, regardless of the commodity, the goods do not stay on the premises very long. Premises where the good are to be delivered are generally rented on a short term basis. Extreme care should always be taken when dealing with businesses operating from accommodation addresses. It is widely known that accommodation addresses tend to provide cover or a base for a cross section of criminal activity, not just white collar crime. Long firm fraud is organised crime on a large scale and in most cases is drugs related and have been know to fund terrorist activities in the past.
link of the case study: https://www.debtcollectuk.com/long-firm-fraud/
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