The 101 on Avoiding International Scams

With the world economy in a tailspin, our international lawyers have been seeing a massive uptick in international scams. This post describes some of what we are seeing and sets out the basics for what you can do to avoid becoming a scam victim.

Quick summary: 1) If it seems too good to be true, it is; and 2) conduct due diligence before spending money.
One of the most common scams is the fake foreign buyer scam, which usually goes something like this:

  1. International company (big or small) receives an inquiry about their product or service.
  2. Inquiry quickly turns into an order.
  3. The international “buyer” invites the foreign firm to its home country (most commonly China) to sign the contract.
  4. The unwary seller flies to the seller’s home country (Yunnan, Guangdong and Hainan are among the favorite destinations within China) to sign the contract and to attend a celebratory dinner. The buyer requests some cash to help pay for the event and/or a “commission” payment to get the deal through in the face of some internal politics, or whatever….Occasionally, my international law firm gets called at some point during steps one, two or three above, but usually we get called after the trip has been made and the money has been paid. The company that calls us is usually seeking to get its money back or to see if it should pay more money or to determine if it will now be forever barred from doing business in the other country again. Our advice is usually to just walk away, not pay any more money and to think twice about going to the particular country again.We give this advice about not bothering to seek the money back because the money is usually too little to warrant paying for legal counsel and because these companies are oftentimes in cahoots with the local police or some other government officials. As for paying more money, the answer is simply that this is a scam and so you should not. Because of the scamming company’s political connections, there are times where returning to the foreign country is not advised, at least not for a while or at least not unless absolutely necessary for some other reason.

    How can you prevent this sort of scam from happening to you? It’s not that tough, actually (unlike some scams). Quick summary: Do the necessary due diligence. Below are some of the red flags you will see with this particular scam:

    • The foreign buying company is just a few months old.
    • The foreign buying company is ready to abnormally quickly spend a large amount of money.
    • The foreign buying company has no trade references.
    • The foreign buying company has no website or a suspicious one.
    • The foreign buying company seems to lack some sort of knowledge your regular buyers usually have.
    • The foreign buying company is in an odd location for its alleged industry.
    • The foreign buying company’s business scope does not match the current deal.
    • The foreign buying company has no online listings nor is it in any directories.
    • Googling the foreign buying company makes you more suspicious.

    In our international fraud cases, there has always been something that should have given the scammed party real pause before sending money.  We have seen the following:

    • “Islands” was misspelled on the letterhead of a company purportedly from the Virgin Islands.
    • The wrong country code was on the letterhead of a company purportedly from Vietnam.
    • The letterhead of a purported Chinese company was entirely in English.
    • The company was in a Mexican city that made absolutely no sense for its line of business.
    • The company’s bank literally did not exist.
    • The company’s address literally did not exist.
    • The company’s address (it was purportedly an investment bank) was a Blimpie.
    • The website was two days old for a purportedly large company that claimed to have been in business for 15 years.
    • The company claimed to have thousands of retail outlets and yet not a single one showed up on Google.
    • Numerous complaints on Google for exactly the same thing for which our client was scammed.

    I find it amazing how many times we have been able to deem an international deal to be a scam just by spending an hour or so on Google. There is no excuse for failing to conduct at least a Google search on the company to which you will be sending money.

    What do you do though if your big perhaps real buyer wants you to go to its country immediately and you want more time to determine if it is on the up and up?

    • Delay the trip on a suitable pretext. You CEO is making a sudden visit. This is such a big deal you want your CEO to come also. You are in bed with COVID-19.
    • Invite the buyer to visit you and offer to deduct the costs of the trip from the contract price or even to pay for it outright.
    • Be creative.

    The more foreign a market is for you, the more careful you need to be and the more you need someone you can trust to help you navigate the unfamiliar waters. And yet, the more foreign a country is, the more small businesses latch on to the first contact they make who speaks their language and expresses an interest in their business.

    Most small businesspeople are used to going it alone. They are independent and resourceful and they have often gotten where they are by winging it. Unfortunately, when it comes to strange and foreign lands the skills you have for winging it in your home country very likely will not translate and your personal resourcefulness will likely not be enough.

    What are you seeing out there?