Understanding how supplier fraud actually works is the most effective way to recognise it before it happens to you. The five case studies below are composite patterns drawn from publicly reported fraud types, Action Fraud statistics, and court records. They are not accounts of specific individuals or companies, but they reflect the mechanics of real fraud schemes that have cost SMEs and importers millions of pounds and euros. Each case study identifies the warning signs that were present — and what due diligence would have prevented the loss.
Case Study 1: The Phantom Electronics Supplier
What happened
A UK-based e-commerce retailer found a supplier on a B2B marketplace offering branded consumer electronics at 35% below the prices of their existing suppliers. The supplier had a professional website, a UK phone number, and responded quickly to emails. After a brief negotiation, the retailer agreed to a first order of £28,000 and wired a 50% deposit. The supplier confirmed receipt, provided a tracking number, and then went silent. The tracking number was fake. The website disappeared within two weeks. The phone number was disconnected.
Warning signs present
- Red Flag Price was 35% below market — a classic advance fee fraud setup
- Red Flag Company was incorporated 4 months before the transaction
- Red Flag Registered address was a virtual office with 200+ other companies
- Red Flag No verifiable trading history or independent reviews
- Red Flag Requested 50% advance payment on first transaction
What due diligence would have revealed
A Companies House search would have shown the company was 4 months old with no filed accounts. A Google search of the registered address would have revealed it as a virtual office. A reverse image search of the website's product photos would have shown they were stolen from a legitimate manufacturer's catalogue.
Case Study 2: Business Email Compromise — The Changed Bank Details
What happened
A German importer had been buying textiles from a Turkish supplier for three years without incident. In March, they received an email from their supplier's usual address explaining that the company had changed banks and providing new account details. The email was professional, referenced their ongoing order by number, and included the supplier's usual email signature. The importer wired €45,000 to the new account. The real supplier called two weeks later asking why payment had not arrived. The email had come from a spoofed domain — one letter different from the real supplier's domain — and the money had gone to a fraudster's account in a third country.
Warning signs present
- Red Flag Bank details changed mid-relationship via email only
- Warning The email domain was subtly different (supplier-textiles.com vs supplier-textile.com)
- Warning No phone call to verify the change was made
- Warning New bank account was in a different country from the supplier's registered address
What due diligence would have prevented it
A single phone call to the supplier on their verified number — not a number provided in the suspicious email — would have immediately revealed the fraud. This is the single most important defence against BEC fraud: always verify bank detail changes out-of-band (by phone) before making any payment.
Case Study 3: The Offshore Shell Company Distributor
What happened
A Portuguese food importer was approached by a company claiming to be an exclusive distributor of a well-known Brazilian food brand in Europe. The company was registered in the British Virgin Islands and had a professional website with the brand's logo. The importer agreed to a €60,000 order for six months of exclusive supply. After payment, the "distributor" delivered two small shipments of substandard goods and then claimed the brand had terminated their exclusivity agreement. The brand had never heard of them.
Warning signs present
- Red Flag Company registered in BVI — a classic offshore secrecy jurisdiction
- Red Flag Claimed exclusivity that could not be verified with the brand directly
- Red Flag No physical address or verifiable presence in Portugal or Brazil
- Warning Requested full payment upfront for a 6-month supply agreement
- Warning No verifiable trading history or references from other distributors
What due diligence would have revealed
A direct email or call to the brand's official headquarters (found via their official website, not the distributor's claims) would have immediately confirmed there was no exclusive distribution agreement. BVI company registrations are opaque by design — the inability to verify beneficial ownership should have been a stopping point.
Case Study 4: The Cryptocurrency Escalation
What happened
A Spanish SME owner found a supplier of industrial components on a LinkedIn group. Initial communications were professional, and the supplier provided a company registration certificate (which turned out to be forged). A first order of €8,000 was agreed, to be paid by bank transfer. At the last moment, the supplier claimed their bank account was "under audit" and asked for payment via USDT (Tether) to a crypto wallet. The buyer, not wanting to lose the deal, complied. The goods never arrived. The supplier's LinkedIn profile disappeared.
Warning signs present
- Red Flag Last-minute switch from bank transfer to cryptocurrency
- Red Flag Vague explanation for the switch ("bank account under audit")
- Red Flag Company registration certificate could not be verified in the official registry
- Warning Supplier found via social media only, no independent verification
- Warning No formal contract provided
What due diligence would have prevented it
The rule is simple: never switch payment method at the last moment under pressure. Any legitimate supplier can wait 24–48 hours while you verify the change. A request to switch to crypto at the last moment is a near-certain indicator of fraud. The forged company registration certificate would have been identified by checking the official registry directly.
Case Study 5: The Long-Con Relationship Fraud
What happened
A Dutch importer of clothing accessories had been dealing with a supplier in a FATF grey-list country for 18 months. The first four orders went smoothly — small orders, on time, good quality. On the fifth order, the supplier requested a significant increase in the advance payment (from 30% to 70%) citing "raw material cost increases." The importer, now trusting the relationship, agreed and wired €85,000. The supplier delivered a partial shipment of inferior goods worth approximately €12,000 and then became increasingly unresponsive. Legal action in the supplier's country proved impractical.
Warning signs present
- Warning Sudden increase in advance payment percentage after relationship established
- Warning Supplier in a FATF grey-list country with limited legal recourse
- Warning No trade credit insurance in place
- Warning No Letter of Credit or documentary collection for the larger order
What due diligence would have prevented it
This is the "long con" — building trust with small successful transactions before executing the fraud on a large one. The defence is to maintain consistent due diligence regardless of relationship length, and to use a Letter of Credit or documentary collection for any order significantly larger than previous ones. Trade credit insurance would have covered the loss.
Common Threads: What All Supplier Fraud Has in Common
Across all five case studies, the same patterns emerge:
- Urgency or time pressure — fraudsters create artificial deadlines to prevent verification
- Requests to bypass normal payment channels — crypto, personal accounts, third-party accounts
- Inability to verify identity independently — company registry, official brand confirmation
- Prices or terms that seem too good — below-market pricing is a setup, not a bargain
- Escalating commitment — small successful transactions building to a large fraudulent one
🔒 Protect Your Next Transaction
Trade credit insurance covers supplier default, non-delivery, and insolvency. Policies can be arranged per-transaction or as an annual facility.
Before your next supplier payment, use our free Supplier Due Diligence Risk Checker — it takes under two minutes and flags the same warning signs described in these case studies. Also read our guides on payment method risks and how to verify a company registration.