Whether you’re a small business or a big enterprise, the consequences of dealing with an illegitimate company are always harmful. For instance, let’s say that a young startup signed a contract with a supplier that doesn’t actually exist. That means the company got burnt and lost time and money resources. And let’s not forget third parties and customers; they all require running a series of background checks.
It’s natural to worry about the authenticity of a company, especially if you think of doing business together.
Similar to Know Your Customer (KYC) regulations where businesses verify their customers’ identities, it’s become standard practice to check the authenticity of a company. This is where Know Your Customer (KYB) compliance measures come in handy. To complete a smart risk-mitigation strategy and combat fraud easier, businesses use automated KYB tools, such as Business Verification, to scan and check the legitimacy of any company.
While it took us a while, modern businesses are no longer annoyed to carry out due diligence and keep up with the ever-evolving regulations. Despite the positive, pro-compliance mindset, fraud remains a challenging issue that’s hard to tackle for many companies. Did you know that 90% of money laundering crimes are never detected? The United Nations claims that around $800 billion to $2 trillion is laundered annually around the world.
One thing’s for sure. Whether you’re a business or a customer thinking of making an online purchase, nobody wants to fall into a trap just to find out that the company or the website turns out to be a scam. Thankfully, being aware of the most common scamming techniques helps prevent unwanted losses.
Make Sure to Review the Company’s Website
Naturally, certain red flags raise suspicion regarding the business’ authenticity. First things first, if you can’t find any contact information listed on the website, such as a legitimate phone number, and there’s no way to contact the company, chances are the business might not be genuine. The easiest way to check if the phone number is valid is by calling it. If it’s disconnected, that’s automatically a bad sign.
Remember that today, having an email address isn’t the most trustworthy indicator of the legitimacy of a company. That’s because emails and domain names are obtained easier compared to offline contact information. If we take a look at financial institutions, they fall on the stricter side of the jurisdiction, which requires such regulated entities to provide the following data:
- Information about the company’s payment methods
- The purpose of business transactions
- The business’ location
- The nature of the company
- Information about partnerships and the company’s certificates
Study the Address Information
Address fraud remains one of the most common types of fraud today. Usually, fictitious office addresses are used to launder money and hide from authorities.
If you suspect that a company is fake, check the website and the listed address details. If there’s no address, take it as an instant red flag. Don’t be afraid to ask the company questions. You can also always phone the company and ask the manager to describe the surrounding area. Once you have this information, you can use Google Maps to check if it matches the description.
In case it’s a local business, as an alternative to the internet, you can visit the physical address to determine the location’s legitimacy. You can indeed learn a lot about a company by visiting its brick-and-mortar location.
Check the Company Number
For example, as a result of the First Company Law Amendment Directive, all limited companies in the United Kingdom have registered company numbers that are presented together with the company’s place of registration. Generally, a limited company is legally separated from its owners and managers, typically consisting of shareholders and directors. The company number remains the same even if the business changes its name, address, or shareholders.
Look for Grammar Mistakes and Other Discrepancies
Did you notice that there are grammar mistakes on the company’s webpage? This probably isn’t a coincidence. If the business location is registered in the USA, but you notice poor English, there’s a chance that the company is based overseas. If the business claims to be local, take this as a sign to check the company more thoroughly before jumping into any business agreements.
Another reason indicating that a company might not be genuine is an overall lack of professionalism. If you notice stolen copyrighted images and any inconsistencies, be careful. For instance, if the company claims to provide one service but then contradicts itself by showing false details about a completely different service, the company might turn out to be a complete scam. As an extra security step, you can check the company’s domain name to understand how long the website has been active using special databases, such as WHOIS.
A real company typically has an About section where you can review its ethical backgrounds, such as the company’s mission, vision, values, or team members. That’s why you should also look through the company’s overall content and its history. If the company doesn’t have a history, you need to take it as a big red flag. Did you notice stock photos? No sign of decent product photos? Seems like a fake web business that’s trying to trick you into trusting them.
Search for Feedback and References
One of the most effective ways to find out if a company is legitimate is to search for feedback or any other forms of customer reviews online. The company’s website is one thing, but other websites and sources can provide more trustworthy details about the business. Remember, complaints aren’t always a huge deal, but you should look out for keywords like “scam” or “lawsuit”.
Naturally, a company that has been operating for several years might be more reliable than one that’s a few weeks old.
Take your time to look around. Of course, don’t assume that a company is authentic just because it has a few negative reviews. It’s important to check a few different sources and websites to better understand the company and its intentions. Businesses with a proven reputation and a professional online presence often comment on Trustpilot, Yelp, or other social media sites.
Companies often provide references on their websites. If that’s the case, you can phone the person giving the reference and check if the positive review is legitimate. If the company lists another business as a reference, you can run a quick background check and contact them as well. It’s always a good idea to check the company’s partners. If you ask for a reference and the business refuses to provide it, take it as a signal to choose a different partner.
Look into Accepted Payment Methods
What’s worse than accepting cash? Perhaps checks. No matter if you’re a customer or a business, the number one rule to knowing if a company is legit is its payment methods. Be careful of companies that require accessing your bank account for big purchases.
Typically, a legitimate company has a money-back guarantee. As a whole, it’s considered safe to pay through credit cards or such payment methods as PayPal. If the business doesn’t accept any of them, it clearly indicates that the company is suspicious.
Examine Official Sources and Other Documentation
You can check if a company actually exists using special databases, government bodies, and online tools. That’ll help you to determine the business’ authenticity easier. Here are some examples:
The Financial Services Register (FCA). Almost all financial service activities must be authorized by the Financial Conduct Authority in the UK. That means if a business claims to offer products linked to financial services, their website will appear on the register unless they aren’t regulated by the FCA, which is automatically a red flag.
Companies House. This is a unique database of all limited companies and limited liability partnerships recorded in the UK. If you’re doing business with such a company, that means they’ll be required to submit certain data to Companies House. The database holds information about a company’s address, status, previous names, and incorporation date. On top of that, it shows directors’ backgrounds along with their appointment history.
The US Department of Commerce. It has 13 bureaus working to accelerate the growth of quality jobs across the country. Additionally, it issues special business Due Diligence reports, including key information about the business: such as the name, address, type, sales territory, number of employees, or the established year.
Better Business Bureau (BBB). You can look up companies in the United States and Canada on the Better Business Bureau. Founded in 1912, this private nonprofit organization “helps people find and recommend businesses, brands, and charities they can trust.” BBB holds consumer complaints data, and you can also search where the company is located or where it’s doing business. You can type the phone number or an address, and it’ll show the specific company you are looking for.
Use iDenfy’s Company Check for an Automated, Hassle-Free Approach
Scrolling through multiple news articles and bureaus online isn’t all fun and games. Reviewing all of the sources manually might be stressful. It’s easy to make mistakes and miss some important points, especially when doing complex, thorough company research on your own. Don’t worry. Use this chance to leave the struggles behind.
Our Business Verification platform helps you to stay compliant; at the same time, check any company to see if it’s legit within minutes.
Address, status, location, office interior/exterior photos, shareholder information, director details, Ultimate Beneficial Ownership data, company’s website/social media screening, and many more important details regarding any company are gathered for you in one place.
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