Targets of the majority of Chinese frauds are companies that are just beginning to cooperate with a Chinese partner. For example, Big Order Scam. Therefore, importers who have been trading with one company for years without any problems are convinced that they are safe and none of the Chinese scams concern them. However, this kind of thinking can be very deceptive. Unfortunately, even an experienced importer, who maintains a good business relationship with his trade partner, can fall victim of the Chinese scam. As a warning, we present the China Bank Switch Scam and how to protect yourself from it.
How does the China Bank Switch Scam work?
You cooperate with one Chinese trade partner for a long time. Since he had always performed the agreed obligations, you lower your guard. When you receive a message about a new bank account number, you don’t suspect anything. You simply transfer money to the given account number. After all, you have worked with this Chinese supplier for many months or even years. You never had any problems, so you trust him. However, unexpectedly, the manufacturer doesn’t want to send the goods and claims that he didn’t receive any payment. But you’ve transferred money to him!
What happened? The money transfer indeed happened, but it was wired to the fraudster’s bank account instead of your partner’s. Why? The information about the switched bank account was sent by a scammer, possibly a former employee who still has access to the company’s electronic mailbox or sent you a message via WeChat. Provided bank account number actually is a private bank account or account of another company.
How to avoid the China Bank Switch Scam?
The company owner could change the bank account number, but it could also be false information from a former employee. In order to protect yourself from this scam, it’s essential to confirm a bank account, ideally in several ways. It’s not enough to check the authenticity of an e-mail address which sent the message! Make sure over the phone that the author of the message still works in the company. Find out whether the current company’s bank account number is the same as the one listed in an e-mail. You can also request the company to fax you this information, confirmed by the legal representative’s signature and a company chop. It will lower the risk of forgery.
To protect yourself from the potential scam in the future, at the beginning of the cooperation you can set up a special procedure to confirm bank account changes with your supplier. Before transferring money to a new bank account number, it’s always better to spend some more time and make sure that everything is correct rather than gullibly transfer money to the given account. Remember that banks don’t offer insurance on such transfers. After completing the payment, there’s a very slim chance to get the money back.
When should a bank account number raise your suspicion?
Before transferring money to China, you should also pay attention to the type of bank account. This way, there’s a smaller chance of falling victim to the China Bank Switch Scam and other frauds (for example, transaction with a non-existing company). Generally, money transfer to a company account is relatively safe, comparing to a private bank account.
However, you still need to check the bank and country where the account is registered. If it’s a Chinese bank, the risk of fraud is significantly smaller than in the case of a bank account in Hong Kong. Hong Kong is a Special Administrative Region with its currency, law, and banking system. It’s very easy to open a company there. Therefore companies registered in Hong Kong may be involved in various types of frauds. The Offshore Banking Unit should also raise suspicion as it’s a bank unit registered abroad, most often in a tax haven. Fraudsters often use this kind of bank account for money laundering, tax evasion, and other illegal activities.
Money transfer to the wrong bank account is one of the biggest threats that can happen to an importer who is trading with China. For this reason, even entrepreneurs who have been successfully doing business with a Chinese partner for a long time need to be vigilant. The China Bank Switch Scam can also happen before the first payment and therefore concern companies who begin to trade with China. When establishing a relationship with the potential business partner, protect yourself from frauds and verify Chinese company for credibility.