Due Diligence
February 2014

5 Warning Signs That You’re Dealing With Chinese Scammers

Incidents involving Chinese scammers are rife as many unwary buyers chase their dreams of sourcing products at incredibly low prices. These stories often arrive in our inbox, but in many cases there is little that can be done once these scammers have got someone’s money.

Prevention is better than cure, so if you’re looking to source products from Chinese suppliers, make sure that you’re at least up to speed on these simple warning signs that something is amiss.

1. Chinese Scammers Love Western Union!

If there’s one big give-away that you’re communicating with Chinese scammers and not with a real supplier, it’s requests for payment via Western Union. There are many options for paying suppliers in China, but Western Union is never recommended for this purpose.

Western Union is a favorite of Chinese scammers because it’s the easiest way for them to acquire the victim’s money and get away with it. Legitimate suppliers will almost certainly accept payment by other, safer means. Even Western Union themselves recommend that you don’t use their service for such purposes.

2. Branded Products (Especially Electronics)

Another classic hallmark of product supply scams from China is the offer of branded goods at low prices. It’s usually a nail in the coffin for your money if the branded products are consumer electronics. These sorts of scams are particularly common on Alibaba.

The old adage can’t be repeated enough: if it seems too good to be true, it probably is. Big brands, as a rule, do not sell their products wholesale through Alibaba. They’re big and successful enough to have their own distribution channels. If these products really were available at the price offered, many other people would be selling them at cheaper prices.

This may sound obvious, but unfortunately the amount of cases we come across suggests otherwise. People continue to send their money to these Chinese scammers in large quantities. Many of these scams can be avoided by simply taking a moment to think critically about what’s being offered.

3. Personal Bank Accounts

Here’s another handy rule for doing business with Chinese companies: never make payments to personal bank accounts. There is absolutely no reason for a legitimate business to be operating through a personal bank account, and it is in fact illegal for them to do so under Chinese law. Businesses must use business accounts (makes sense, right?).

If you don’t have much knowledge of the Chinese language and banking system, it may not be immediately obvious to you if account details you’ve been given are for a personal or business account. If they aren’t using Western Union, Chinese scammers will probably be using a personal bank account. Contact us for straightforward advice if you’re in that situation.

Another source of reassurance is a company’s bank account license. This shows you that an account genuinely belongs to the company in question and is a registered business account. Of course, this doesn’t guarantee that the company itself is trustworthy, but it does let you ensure that you’re making payment to the right organisation.

4. Requests for Extra Payments

One favorite tactic of Chinese scammers is to push for additional payments once a victim has sent the first one, giving various explanations about why further payment is necessary to continue with “the deal”. This plays on a psychological flaw called the sunk cost fallacy. Victims keep paying to try to avoid losing the value of their initial payments.

Most law abiding people will find this behavior shocking because it seems so ruthless, but that’s exactly what these scammers are about.

Note that legitimate suppliers may sometimes engage in increasing payments beyond what was agreed to. This may simply be due to poor business ethics, but it could also be due to genuine unexpected costs incurred by the supplier, or uncertainty in the deal. In any case, thorough due diligence is always necessary to get as much detail as possible in advance.

5. Lack of Verified Documentation

Chinese scammers will gladly be able to hand over photo-shopped documentation ‘proving’ their authenticity. Pretty much all documentation is easy to fake, especially when it’s being viewed by non-experts in other countries who are not accustomed to the type of documentation in question.

Documentation is only worth anything when it’s backed up and corroborated by proper verification. Until you’ve had them verified with the certifying authority, you should attach little importance to documents you’re shown. This applies to everything from business licenses, bank account licenses, ISO certification, QA reports and so on.

Note that the Alibaba Gold and Onsite Check labels do not count as verified documentation! (Follow that link to read more about how little these services do to actually ensure the quality of suppliers on the platform).

Here at China Checkup, we specialize in identifying and verifying Chinese companies, so if you are in any doubt check out our fast and convenient Chinese company verification services.

Have you come across these warning signs whilst doing business? What other indicators of Chinese scammers have we missed here?

If you have fallen victim to Chinese scammers you may be interested in reading these articles:

Verify a China Company.

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