Seven Crafty Scams

SEVEN CRAFTY SCAMS ================== Fraud is unfortunately rife in the hospitality industry. Neil Gerrard looks at some common and some extraordinary cases and how to avoid them ---------------------------------------------------------------------------------------------------------------------------------------------
[**1.The money mule**](#money_mule)**[ 2.The dirty tie](#dirty_tie)[ 3.The inside job](#inside_job)[ 4.The exhibition](#exhibition)[ 5.The eavesdropper](#eavesdropper)[ 6.Give us a job](#job)[ 7.The runner](#runner)[ Change behaviour to limit losses ](#change)[Have you been scammed?](#scammed)**
### 1. THE MONEY MULE![]( SITUATION It all starts with a friendly email request, often in slightly suspect English. Your new customer would like to send a tour party your way, usually consisting of 10 people. The hungry holidaymakers need feeding three times a day for several days, usually at a date some way off in the future, so that you are likely to have availability. It sounds almost too good to be true. But it gets better. These generous souls would like to secure their booking with a substantial advance, and no number of polite attempts to decline will persuade them to change their minds. However, they would like a small favour. They need to pay an agent or tour operator who is leading the group’s holiday in your country but he doesn’t have credit card facilities to run a payment. Luckily you do, so your new friends would like to know whether it wouldn’t be too much trouble to take his payment through your credit card facilities? Then you can just transfer the money to him for a small fee.THE SCAM The fraudsters are generally based overseas and are using stolen credit card details. In order to mask their own identities from the people they have stolen from, they want to use you as an intermediary to pay the money back to them. That’s right – there is no tour operator! Not only that, but if you fall for it, you’ll find that your customers don’t turn up, and you’ll end up with stolen money (the “deposit”) in your bank account. The fraudsters have made you their money mule, and as a result you too can be prosecuted.HOW TO AVOID IT Simple. If it looks too good to be true, it probably is. Don’t answer the email. [Back to top ](#top) ### 2. THE DIRTY TIE![]( SITUATION There are lots of variations on this one but they all run along the same theme. Someone claiming to be a long standing customer of yours emails you to say that a waiter spilled wine on their tie, trousers, dress – whatever it may be. They didn’t worry about it at the time and the waiter assured them that if there was a problem, the restaurant would pay for the dry cleaning bill. But on getting home, they realise they couldn’t get the stain off the tie and now they are faced with a gargantuan bill. One email sent to Caterer and Hotelkeeper from a restaurateur who had been targeted by this scam was asked for £94 to replace their “extremely special” tie. They also offered to make another, presumably fictitious, booking in an attempt to prove they were a real customer.THE SCAM In most cases, it will turn out that the whole incident was a lie. There never was any wine spilled, no waiter was responsible, and no items of clothing were sullied in the process. And the only cleaning the fraudsters are attempting to perform is the cleaning out of your bank account.HOW TO AVOID IT Check the bookings to see if your “customer” really exists. If necessary, go back to them politely for more details so that you can attempt to verify it with your staff. If it turns out not to be true, then you can tell the fraudster – and their tie – to get knotted. [Back to top ](#top) ### 3. THE INSIDE JOB![]( SITUATION There are all sorts of ways that seemingly reputable employees of hospitality businesses – whether it is hotels, restaurants, pubs or bars – have been found defrauding their employers and endangering the business in the process. Often it only comes to light when the business’s unsuspecting owners or managers look through the books and notice sums of money that have gone missing in ways that cannot be accounted for.THE SCAM Businesses can get stung for significant amounts of money if a once-trusted employee goes rogue, and according to their level of responsibility, they can access the cash and cover their tracks – at least for a while. One of the most flagrant recent examples of an employee stealing from his employers was a Little Chef supervisor, Yiuman Poon, who stole £700,000 by telling his colleagues at the Dreghorn, North Ayrshire branch of the roadside diner not to come into work because of an electrical fault that stopped the machines in the restaurant working.He took the opportunity to transfer the cash into his accounts in a bid to pay off gambling debts, Edinburgh Sheriff Court heard. Poon was rumbled when a workmate he’d forgotten to phone arrived for an afternoon shift to find the restaurant deserted and a refund receipt for £458,000 lying on the floor. But there are many more subtle examples. In 2006, for example, six former Hilton Birmingham Metropole employees and a booking agent were found guilty of stealing £200,000 in bogus commission payments by taking advantage of the conference booking system to divert “commissions”, which should have been paid only on bookings made by an agent, when firms had booked direct.HOW TO AVOID IT If done carefully, this can be one of the hardest frauds to detect. You have to make sure that your accounting procedures and control on costs are tight enough to notice when money goes missing but more importantly, a strong anti-fraud culture. And sadly, if you do start to notice discrepancies, you can’t make the assumption that one of your trusted employees or colleagues isn’t involved. [Back to top ](#top) ### 4. THE EXHIBITION![]( SITUATION There are plenty of legitimate shows and exhibitions in the world of hospitality, some of which you may choose to exhibit at, particularly if you are a supplier. Wouldn’t it be useful, then, if there were a guide that features your business details at various industry exhibitions throughout the year? Perhaps, but not all of these guides are what they seem. One firm contacted Caterer and Hotelkeeper last year to warn that they had received a letter, complete with a form and a pre-paid reply envelope, inviting them to appear in just such a guide. The letter even noted that the recipient had previously appeared at a legitimate UK show, in an attempt to make the offer sound genuine. All the form asks you to do is confirm the various company details and return them for your “free” listing. Just confirm the details, enclose your business card and give your “legally binding” signature.THE SCAM Unfortunately, there is also some small print, which it’s rather important that you read. Because in reality the listing isn’t free at all. If you sign the form, the company – based in Mexico in the case of the example we were sent – will attempt to bind you into an agreement lasting years with a high annual payment running into thousands of pounds. And in the case of the example we saw, the carefully concealed blurb also claimed that the agreed period could be automatically extended by them at any time.HOW TO AVOID IT If you haven’t heard of the guide and don’t know if it’s legitimate, then don’t sign the form. [Back to top ](#top) ### 5. THE EAVESDROPPER![]( SITUATION A guest in your hotel restaurant demonstrates incredible largesse by buying dinner for several of his friends, along with a couple of bottles of your finest wine. A good time is had by all and his companions depart, full and happy. He puts the feast on the tab for his room and disappears too. Meanwhile, some time later, a family checks out, only to find that they have been billed for a meal for seven and copious amounts of Champagne unexpectedly – even though there’s only four of them and the children don’t drink.THE SCAM You don’t need to fly Hercules Poirot in from Belgium to unravel this surprisingly simple scheme. The fraudster waits around at reception and listens in to bona fide guests giving their name and room number before making a note of the information and then using it on an unsuspecting member of staff to run up a tab. This is what happened at the Headland hotel in Newquay in 2011, when Anthony Stephen Murphy splashed out on a meal for himself and five friends, complete with bottle of Bollinger, at the expense of a genuine guest. His ruse was uncovered when he was spotted on CCTV recordings lurking behind the family when they checked in at reception. He was prosecuted successfully and forced to repay the hotel.HOW TO AVOID IT Beware of individuals lingering and acting suspiciously around the front desk, especially if you don’t think they are a guest. If you are concerned, approach and ask politely if they need any help. In most cases it should be enough to scare them off if they are up to anything untoward. [Back to top ](#top) ### 6. GIVE US A JOB![]( SITUATION It has been known in some hotels, particularly some of the better-known ones, for the odd new employee to turn up on the doorstep asking when and how they start work. The only problem is, the hotel didn’t hire them, so how did they get here? This happened to Hotel Verta by Rhombus in London last year, after overseas applicants applied online, and were then told they had been accepted, for non-existent positions at the business. Sadly when they arrived they found there were no such jobs, and the hotel knew nothing about them.THE SCAM The website the applicants use, as well as the jobs, is a fake. This international scam preys on people hoping for employment in the UK by posing as a recruitment agency and advertising false vacancies and real-life hotels. Applicants are promised high salaries, but are charged a fee in advance to “process immigration documents”. It is not known how many people have fallen victim to the scam, but one woman from Romania arrived at the 70-bedroom Hotel Verta to start work at a fictional job. And another hopeful candidate in the Philippines who contacted Caterer and Hotelkeeper after he became suspicious about being asked to transfer money in advance of taking up a job he had been offered at the same hotel as a “food and beverage team member” on a purported net monthly salary of £3,050 also turned out not to have been engaged by the hotel at all. The hotel was not involved in any way at all with the scam, nor was it affected.HOW TO AVOID IT Sadly in this case, there isn’t much hoteliers can do, since the scam uses the name of their business but does not impact them directly. [Back to top ](#top) ### 7. THE RUNNER![]( SITUATION Your guests turn up for a no expenses-spared meal or stay (or perhaps both), with three courses and lashings of Champagne. Everything seems to be running normally and the diners are having a great time. But when it comes to paying the bill, they all bolt, leaving you out of pocket.THE SCAM This one isn’t exactly subtle and the perpetrators are rarely successful for long. But it is common. Only weeks ago, a group of four mystery guests ran up a £500 bill at Milsom restaurant in Dedham, Essex, including oysters, filet steak and two bottles of Dom Perignon. But they vanished before anyone managed to get them to pay. A high-profile case last year saw a couple go to a string of high profile London restaurants under the name Lupin (a possible reference to French gentleman thief Arsene Lupin) before making off without paying, having pretended to pop out for a cigarette at the end of the meal. Bills they incurred included a £572 tab at Michelin-starred L’Autre Pied. It eventually transpired, after he had been caught on CCTV, that Latvian fim-maker Janis Nords was responsible, and had been trying to impress his “high maintenance” girlfriend.HOW TO AVOID IT Aside from asking guests for their payment details up front, which is not advisable, you are going to have to take your customers at face value – after all, the vast majority will be completely honest. But stay in touch with other local businesses so you can warn each other of serial thieves operating in your area. [Back to top ](#top) ### CHANGE BEHAVIOUR TO LIMIT FRAUD LOSSES By Jim Gee, director of PKF accountants and business advisors, and chairman of the Centre for Counter Fraud Studies at the University of Portsmouth --------------------------------------------------------------------------------------------------------------------------------------------------- Fraud is a significant problem in the hospitality sector. Applying figures derived from a report I co-authored on the financial cost of fraud, published in 2011, the hotel sector alone could suffer losses of £2b a year as a result of fraud and error. And fraud is on the rise again – up 30% since the onset of the recession. In fact, fraud rises every time there is a recession, and we have seen it happen before in 1980/81 and 1990/91.Many of the cases described in Caterer and Hotelkeeper’s article are interesting because they are so unusual. But the most common type and most successful types of fraud are those that are high volume and low value. These cases aren’t terribly noticeable because the amounts involved are relatively small, but the damage they can do is great.Often they are perpetrated by dishonest employees within a company, or by dishonest parties outside the business either over-charging for goods and services, or failing to provide the services promised. Even when these incidences of fraud are spotted, companies often think it is disproportionate to react too strongly to what can often be the loss of relatively small individual amounts.The chances are, though, that the fraud won’t be discovered. Even the best performing organisations around the issue of fraud only detect as little as 1/30th of the total fraud that affects them. That means that for every one that you find, there are 29 others which are taking place and continuing to cost you money.That’s why, if you want to prevent it from happening, it is best to forget the idea that you can detect all the fraud that is taking place, and try instead to pre-empt it by having the minimum number of weaknesses in your processes and systems. You need a strong anti-fraud culture and a strong anti-deterrent effect. If you can grow and mobilise the honest majority and shrink and deter the dishonest minority, that is where the greatest gains are to be made. **For a free, confidential fraud self-assessment tool, go to:**[]( [Back to top ](#top)HAVE YOU BEEN SCAMMEDHave you been a victim of a fraud, perhaps involving a scheme that we haven’t mentioned? Tell us about it by emailing, or tweeting us [@caterertweets](
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