How to Confirm You're Working With a Legitimate Foreign Company


Working with a foreign company may seem promising for your business growth. But if the company isn't legitimate, all sorts of problems can arise.

Did you know the cost of fraud is on the rise? Specifically, it has risen by 19.8% since 2019, according to a survey from Lexis Nexis. Take a moment to think about that because every year fraudsters are becoming more sophisticated in how they target businesses.

PwC’s 2022 Global Economic Crime and Fraud survey highlighted platform fraud as the most damaging crime, accounting for three-quarters of all reported cases. If that wasn’t bad enough, PwC estimates that every $1 lost to fraud costs US and Canadian businesses an average of $3.75 and $3.19, respectively. These figures should be a wake-up call for businesses to be more proactive about doing due diligence on businesses, particularly when working with foreign companies.

Working with foreign companies may seem exciting and present growth opportunities for your business, but you shouldn’t just say ‘yes’ to working with them without vetting them. What if they are on a sanctions list? What if they don’t even exist and you’ve fallen prey to a scam? We’ll help you navigate this process with tips on what to look out for when working with foreign companies.

Working with a fraudulent company
Chapter 1

Check the website

Your first point of call is the company website. You want to make sure the website exists and goes to the right place.

Look up the address and phone number

Start by looking at the company’s website to see if there’s a phone number and business address listed. Google Maps will quickly tell you if the company has an actual address. If an address doesn’t show up on Google, call the number to verify that there’s someone from the company available to speak. Either a company representative will answer or the number won’t be in service. Both scenarios are useful for making sure the company is legitimate.

Still not convinced the company is legitimate? An extra step is to search for the same business address across different cities or localities. If the same details show up, then that’s a red flag. 

Make sure the URL is secure and goes to the right place

Pay attention to the website’s URL and make sure it’s secure with https:// at the beginning of the address. While this isn’t a 100% guarantee of detecting scammers, it does show that the site owner is using a protected process to transfer data. 

A pro tip is to verify the URL using Google’s Safe Browsing Transparency Report. The tool is excellent for revealing fake websites and providing data on any suspicious content. Or you can check the domain name with WHOIS. This site is a must-have in your fraud-fighting toolkit because it shows the details of who owns a domain address, how long the website has been running, contact names and business addresses. 

Fake website

Read through every page on the site

Don’t just go to the home page and then leave. Go through every page to make sure it’s not just a shell of a site built to deceive people. Go to the home page to see if it describes the business mission and products/services it offers. Go to the About page to learn more about their executive team (cross-reference them on LinkedIn) and to see if they have any job postings listed. The absence of these could be a red flag that the company doesn’t exist. Don’t stop there. Go to their Product pages to see what specific products/services they offer.

It’s worth looking over as many pages on the website as you can to check things like: 

  • Spelling: Are they using US or UK spelling or are words spelled incorrectly?
  • Grammar: Is there correct use of periods and commas or does the grammar seem all over the place?
  • Spacing: How are paragraphs presented on the pages?
  • Images: Are the pictures relevant to the pages? Is the quality of the images high-resolution or are they low-resolution and just stock photography? 
Chapter 1

Check out their T&Cs and privacy policy

A legitimate company will have a Terms & Conditions policy along with other policies for protecting customer data and offering transparency. This includes a privacy policy that details data protection standards and processing. These should be displayed clearly on their website. 

For example, when verifying if a European or UK business is legitimate, make sure their GDPR policy is clearly shown on their website. An organization selling products should also have a detailed return and shipping policy to give their customers peace of mind. 

Chapter 1

Look at customer references and reviews

Let’s say you’re a business development manager at a big manufacturing company and you get a call from a foreign company owner that sounds really enthusiastic and is interested in working with you.

They say, “I’ve got this great product that’s doing well over here and we’re expanding overseas. We’d love to hire out your warehouse to store our goods.” You say ‘no problem’ and ask for references of local companies they’ve worked with. Suddenly, the caller gets skittish and can’t provide you with anything concrete. Would you work with that organization?

It's always a good idea to ask a foreign company for at least three industry references. If they’re legitimate and trustworthy, they should be able to provide contact names, email addresses and phone numbers for company verification. If they can’t, don’t just ignore that – it’s a major red flag.

Depending on how thorough you want to be, you could arrange a video call with the reference companies. There’s nothing more powerful than looking someone in the eye and asking them honestly what they think (and making sure that person is part of a real company too).

Customer reviews

Customer reviews are another great way to test for red flags. The number of fake company reviews is on the rise, with the Federal Trade Commission cracking down on over 700 businesses in 2021 for deceptive practices. 

Here are some tips for spotting fraudulent reviews:

  • The testimonial is vague and doesn’t show any useful benefits of the product.
  • Poor English has been used.
  • The same review has been listed multiple times for the same product.
  • There are lots of positive reviews published in a short amount of time.

Real, trustworthy reviews will typically be:

  • Specific and detailed (with the names/job titles of the person who left the review)
  • Unique to the product or service delivered
  • Appear on accredited sites like TrustPilot, G2 Crowd, Capterra, among others
Chapter 1

Dig into the financials with an international credit report

A sound globalization strategy is multi-layered. It shouldn’t be done without running an international credit check on potential partners. You’re already doing that for your local customers – analyzing their financial performance, monitoring for late payments and managing risk levels. The same rules apply here for risk management on an international scale.

When running an international credit report, look out for this make-or-break data: 

  • Company verification: The company name, address, number, director details and shareholder information are present.
  • Trade payment information: This financial data is gathered from third-party organizations and shines a light on a business’ payment patterns. The result? A Days Beyond Terms (DBT) score is calculated to show the average number of days (past terms) that a business takes to pay its suppliers.
  • Credit score: As one of the biggest indicators of a brand’s viability, a credit score tells you a lot about a company. If the score is closer to zero than 100, then be extremely cautious with how you proceed.

Of course, there are many factors that impact a business credit score like payment history or court judgments. So, doing deep-dive research into their financial health and payment behaviors is highly recommended.

Another factor to consider is the variance of credit scores by country and the confusion it may cause. We use a universal rating system for international credit scores, which is as follows:

A - Very low risk and can offer extended payment terms if appropriate

B - Low risk and good for transaction

C - Moderate risk and need to monitor carefully

D - High risk and need assurances before giving credit

E - Unrated due to lack of necessary information

International credit risk
Chapter 1

Look at the group structure for irregularities

Just because a business seems to be on the up and up on the surface doesn’t mean everything is fine behind the scenes. It’s possible the company you’re vetting is part of a larger conglomerate that’s in dire financial and legal straits.

The group structure section in an international business credit report will let you know if this is the case. It shows all subsidiaries, affiliate brands and parent organizations so you’re prepared to deal with any issues. 

Chapter 1

It’s better to be forewarned than to be caught by surprise

Regardless of industry, there’s always risk involved when working with overseas companies. It’s a completely different market than yours – there are different legal requirements and regulations, business etiquette and customs. In an era where fraud is on the rise, it’s much better to be forewarned than to be caught by surprise. 

Running an international credit report is an ideal solution for gaining full clarity and we’re here to help. 

Planning to work with a foreign company? Do your due diligence first with an international credit report.

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