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Despite best practices, Small and Medium-sized enterprises (SMEs) usually fall short of ideas to ward off fraudsters who uses the internet to cheat innocent firms.

Both legal experts and entrepreneurs alike opine that SMEs need to be vigilant in the face of a new scams being taking place online.

“In this era of internet we can’t deny the benefits of it, but along with this we should not forget the other side of lamp, which is dark and full of internet frauds or what we call cyber crimes,” Karnika Seth, Attorney at law and Partner of Seth Associates told SME Times.

“Most of the owners of SMEs are not aware about the possibilities and the ill effects of cyber crimes happening in the corporate world around us,” she added.

“There are dark minds working behind the other side of internet who want to steal your private official information, data or want to swindle with you in your business. While doing business globally the common problem in cyber crime is conducting a credibility check of mushrooming overseas companies with their operated or registered virtual offices, which is a new concept. But the fraudster is using these means very often to cheat companies off their hard-earned money. While doing the overseas businesses, a businessman need to check the credibility of the company through its corporate history, through it’s client database and if needed, can go through the financial details of the company,” she said.

“There are cases of phishing or what we called the Nigerian fraud. What is happening is, the cheat creates a virtual bank, which is only present in the electronic form on the internet. These banks are mainly dampened to transaction frauds.”

“There is another thing called cheating by impersonation, where a person is imitating the mannerisms of another person X or Y.”

“The corporate world has a major problem of data theft, which can easily be transferred from one computer to the other with just a single click of mouse. So SMEs need to be aware and should be vigilant of the possibilities and harm of the cyber crimes,” Karnika added.

SMEs too agree that with online frauds lurking around, it has become very difficult to identify the genuine business houses.

“Yes, it is absolutely true that online frauds are emerging as a menace to a great extent. It is becoming very difficult to identify a genuine business dealer,” says Ashok Lav, Managing Director of Delhi-based Aster Softech India.

“Internet business or B2B or ecommerce is basically very popular in foreign countries. And with its popularity came fraudsters too. In India the concept of online business is relatively new. In fact, half of the population is not aware of the Internet. So, I think most of the businessmen try to meet the customers or the client in person rather than browse the Internet for business dealings or business transactions,” he says.

“According to me, I think the Internet is quite risky for any business work. In my business, I generally try to deal with new clients personally via one-to-one meetings.”

“In fact, even the Indian credit card system of making business transaction is in a jeopardy. You never know the person with whom you are doing business. He might be a big fraud for all you know.”

“In case of the corporate world, online fraud is a random business. Many big firms try to do a background check of the company to ensure the authenticity of the business partner,” he adds.

However not all SME holders are unaware of online frauds. Some entrepreneurs feel that SMEs are not active in sharing information on these fraudsters or fraud companies when detected, and thus many companies fall prey to the same frauds again and again.

In a recent discussion on Tradeindia’s discussion forum on ‘Reporting frauds,’ Manoj Jain, Managing Director of New Delhi Mail Order Services Ltd. said, “Sometimes we get cheated by buyers. I feel we should share that information so that others do not get cheated again. We could share information on such buyers.”

Another SME exporter says, “There are a number of actions you can take to research your potential business partner, so that you can reduce the risk of being subject to a fraudulent transaction or business misunderstanding. Verify the identity of the supplier or buyer. Insist on receiving a complete company profile from any new business clients that send you an inquiry/ email. When you have this information, you can contact your local government embassy or Chamber of Commerce in that buyer’s country and verify the information to be correct.”

“Check the partner’s background. Background checks from independent third-party sources include a search for legal registration and credit reports. You can also gain further knowledge about your partner by ordering a credit history report. Several B2B portals provide this service. Credit history reports contain information about the partner’s business history in their relationships with banks and other trading partners,” he says.

“Whenever possible, meet your business partner in person. Protect yourself when ordering or providing samples. As a buyer, order a sample before committing to a purchase order to be sure that the product meets your expectations. As a seller, request payment for a sample and/or payment for shipping costs before you send out the sample, especially if your product has a high resale value.”

He goes on to say, “If you are a buyer, you can protect yourself against poor quality by ordering a pre-shipment inspection of the products. You can demand the inspection as a condition to payment.”

“Protect yourself against payment risk. If you are a seller and have not been doing business with your partner for very long, avoid selling your products on open-account. Instead ask your buyer to open a letter of credit (L/C), he adds.

According to Sunjay Somani, Proprietor of Kolkata-based Surgitech, one should report incidents of fraud “to the MEA of India and also to all the business forums and Chambers of commerces, Export promotion councils related to one’s product all over India.”

“Besides these, leading advertisements in all major English newspapers here would surely attract negative publicity for this rogue company, and in the long term would harm them much more,” he adds.