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How to spot and avoid getting caught in a business scam?

In today’s digitally enabled world, there is a range of scams targeted at businesses, where scammers will use deliberately misleading sales techniques to persuade businesses to part with their money.

If you are worried about the authenticity of a company, it is always worth checking if they are legitimate before you engage with them.


How to spot and avoid getting caught in a business scam?

There are 3 basic steps to be taken, which are elaborated on below:

  1. Conduct Due Diligence
  2. Review agreements to ensure that they are legally secure under Singapore Law
  3. Set up an Escrow Arrangement


It is no longer seen as an annoyance for companies to carry out due diligence and enforce compliance measures; it is now a core business issue that companies are stepping up on, and rightly so.

Fraud is a reoccurring risk that can result in loss, so we look at how you can establish whether you can trust a company or should avoid them at all costs.


Conduct Due Diligence

Know who you’re dealing with. Due diligence is an important process that helps to protect you against possible losses by taking a deeper dive pertaining to business dealings. This will also help give you peace of mind that you’re making the right deal and have all the information you need to make a decision. This process will include searches on the Company register (ACRA), litigation searches, bankruptcy searches on individuals and other related searches on the businesses including searches on the locations of the businesses.


Review agreements to ensure that they are legally secure under Singapore Law

In addition to due diligence, you can guard your company or investments against fraudulent contracts by acquiring an expert. Obtain advice from consultants or lawyers who specialise in business contracts. Negotiating requirements into agreements, such as product samples or analysis, insurance, currency, certification, and compliance or regulatory documentation is an effective measure to ensure you are dealing with legitimate parties.


Set up an Escrow Arrangement

An escrow agreement is a legal agreement, which describes the terms and conditions applicable to the participants involved. An escrow agreement contains a detailed responsibility of the parties involved.

When it comes to escrow agreements, one of the involved parties will deposit certain funds or assets with the escrow agent, usually a law firm. The escrow agent will hold the assets or funds until the conditions outlined in the agreement are fulfilled.

Only when the outlined conditions are fulfilled, will the escrow agent deliver the assets or funds to the beneficiary mentioned in the agreement. Escrow agreements are generally made use of in several monetary transactions, specifically those involving massive volume.

If you are asked to pay a large sum of money as a deposit or payment upfront before any services can be rendered to your company or business, setting up an escrow arrangement through a trusted law firm is a good way to ensure that the other party delivers on their promises before your payment is actually released to them.


Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact us at:

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