Check fraud in Spain

1 min.

In Spain, credit transfers from a supplier to a factoring company is a business potential with red flags. Many fraudulent activities can take place with these type of transactions.

A scam can be set up by a so-called “supplier” in the following manner. When depending on a credit limit granted by a factoring company, the beneficiary can collect the money and then disappear before the due date of the checks.

A recent judgment dated October 4th, 2017 from the Province Court of La Coruña, (Audiencia Provicial) ruled on a case just like this. The client of the factor (Company X)  issued different checks, drafts, and invoices that did not correspond to any real commercial operation.

The drafts were not honored at the due date, but in the meantime, the factor had honored its obligation and paid Company X.

How did Company X manage to “sell” the operation to the factor?

  • They executed normal operations and then enlarged the credit limit.
  • None of the buyers mentioned in the drafts were real companies.
  • Name of the buyer was similar to a real company, but not the same.
  • Same address as a real company but with a different street number.

Luckily, in this case, the criminal paid for it, since the director of Company X was found guilty of fraud and forgery of documents and condemned to one year and ten months in prison. Additionally, the director had to pay back the collected money with interest as a civil liability.