Risk control of email, internet scams in cross-border trade

By Ekin Zeng and Caroline Cheng, AllBright Law Offices
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In cross-border trade, due to the time difference and other factors, both parties of the trade tend to use emails as a main channel for business communication. Convenient as it is, it also carries security risks. In addition to traditional fraud via contracts and parcels, email scams, among the common fraud types in cross-border trade, also occur frequently, and the methods are constantly changing. Recently, police across the country disclosed several email-scam cases.

scams
Ekin Zeng
Partner
AllBright Law Offices

In email scams, offenders infiltrate the mailboxes of foreign trade companies through malware or a “Trojan horse” virus, or with the approach of “spray and pray”, by sending phishing emails on various platforms. In this way, they are able to lurk in or monitor the internal networks of companies. After reading and analyzing transfer and remittance emails, they will use specific talking points and tricks to defraud both parties in the trade. Their deceptive modus operandi, if not carefully distinguished, is rather difficult to detect.

Similar characteristics are found in these common email scam cases:

  1. Offenders will hack for the mailbox password of one or both parties of the transaction. By accessing mailbox content, they can get all kinds of information in the mailbox system, such as the content of the transaction, the contact information of the counterparty, and bank account details.
  2. Offenders will have a clear division of labour, whereby some are responsible for setting up accounts, and some are in charge of communicating directly with overseas customers in English. They will use the information they obtain to defraud, according to the actual situation, such as:
    1. Direct use of the recipient’s mailbox to send counterfeit account information to the remitter, so as to defraud for payment or deposit in the final stage of the transaction;
    2. Impersonating the payee to contact the remitter to change the payee’s account. They will choose a small and unknown website with a very short suffix mailbox, and register under the same user name as the payee, or use the same suffix but change a similar letter on the user name. This is difficult to detect if both trading parties are not vigilant. The authors note that many remitters made payments without telephone reconfirmation;
    3. Modifying the user information stored in the supplier’s mailbox, and changing the email address of the client into their own email address (but not changing the user name of the client). After receiving the email from the supplier, they then send the tampered mail to the client to facilitate fraud;
    4. Using corporate and even offshore accounts to direct the money to repay third-party arrears, or assist in money laundering activities, which makes it difficult in solving cases and recovering funds.

Because of the large amount involved in cross-border trade, both parties often suffer huge economic losses. Now that this type of crime transcends borders, and is very covert, there are often jurisdictional ambiguities when filing cases. It is also very difficult to recover funds, technically and legally. Even if the funds can be recovered, the time cost of the endeavour is high. Therefore, for companies engaged in cross-border trade, during daily operations and office work, they should: Be familiar with the basic characteristics and means of email scams; increase the awareness of the handling personnel; and improve their abilities to respond in case of an emergency when encountering a fraud.

PRACTICAL SUGGESTIONS

From the above-mentioned situations, the authors suggest that the management should exercise a strong sense of caution, and conduct systematic and comprehensive training for employees to prevent email scams. First of all, employees should improve their self-protection awareness. Pay attention to keeping the company information and their own private information properly, such as ID numbers, user accounts, passwords, etc., and make no disclosure to others.

scams
Caroline Cheng
Associate
AllBright Law Offices

Try to avoid e-commerce services in public spaces such as internet cafes, and (3) stay cautious about emails received from unknown sources. Managers should pay attention to the level of corporate network security to avoid external Trojan horse files, or links that will infiltrate computers or systems.

A proper custom should be observed, that is, reminding the other party of staying alert and improving precautionary measures during negotiations, and drafting relevant clauses into the contract such as “Both parties shall only change their accounts or contact information in a specific written form or via multiple confirmations”, and “Before remittance, they shall confirm by telephone or video”, and so on.

Companies should maintain vigilance for abnormal situations in case of a fraud, when receiving emails conveying urgency from the other party, such as “Account status will affect normal use” or claiming “updating account information through the website”. It is suggested that they make telephone or video contact with the other party in a timely manner. If scammed, on the one hand, they should contact the bank as soon as possible to suspend cross-border payments. On the other hand, they should report to a law enforcement department, or seek other professional assistance.

Ekin Zeng is a partner and Caroline Cheng is an associate at AllBright Law Offices

AllBright Law Offices

AllBright Law Offices
11/F and 12/F, Shanghai Tower
No. 501 Yincheng Middle Road
Pudong New Area, Shanghai 200120, China
Contact details:
Tel: +86 21 2051 1000
Fax: +86 21 2051 1999
Email:
ekinzeng@allbrightlaw.com
caroline.cheng@allbrightlaw.com
Website: www.allbrightlaw.com