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In 2014, a Con Artist Was Found Guilty of Stealing Money From a Company
This prosecution for business hijacking is one of a kind and concerned a participant of a crime ring that illegitimately posted CM29 papers to the Companies and Intellectual Property Commission (CIPC) along with minutes and decisions for the revision of chairmanships of global firms with the registrations headquarters in South Africa, including Coca-Cola Africa Limited, NtiroTechnologies, Remag (Proprietary) Limited and MJS Trading Limited.
The defendant was deemed guilty of falsely claiming that the CM29 paperwork that was presented was official and legitimate for the specific purpose of expelling the genuine directors and capturing the fraudulent meeting of new directors by submitting the necessary required documentation by the CIPC along with the identities, the rationale for resignation, and the time frames of appointment.
This sophisticated version of fraud, which is typically carried out by syndicates, has been around for a while, but few people are familiar with it. This is due, in part, to the fact that instances of fraud of this kind are, for the most part, not reported.
The practice of acquiring control of a business through the falsifiability of that firm’s data and records, in addition to making misrepresentations, is referred to as “company hijacking.” Another name for this practice is “corporate identity theft.”
It includes fraudsters illegitimately executing forms from the CIPC to alter the firm’s details, ranging from but not restricted to the business address and the list of offices, who either authorizes buying and selling on the firm’s goodwill or allows the company to continue acting illegitimately and unlawfully under the influence of the scam artist.
It is also possible for it to entail trading underneath the name of a business after stealing its identity and using it. The web listing of a business can also be taken without permission and/or completely replicated to facilitate the commission of this kind of fraudulent activity.
As a consequence of this, an individual who searches for a specific company or product will be taken to the website of the hijacker; alternatively, the details of the legitimate company may not appear on the search results at all, or they may appear further down the page of search results.
As a direct result of this, both the volume of web traffic that visits the legitimate company’s website and the volume of sales that the legitimate company generates are both significantly reduced.
Once They Have Taken Control of the Account, Fraudsters Can:
- By combining the hijacked company with a brand-new entity, you can hide the company’s true identity while also changing the authority under which it operates.
- The hijacker will be compensated with the money made from the sale of the company that was sold after it was taken over by them.
- Issue additional shares to themselves to reduce the percentage of ownership held by the existing shareholders;
- Open bank accounts using the name of the hijacked business and surveil any communication with customers regarding payments for transactions; this will ensure that deposits are made directly into the bank account of the scam artist.
- You can steal customers from the hijacked business by establishing a competing business with a name and activities that are similar to those of the hijacked business.
Companies That Have Been Hijacked Are Frequently Used in Pump-and-dump Schemes
These schemes involve the scam artists spreading misleading or false information to shareholders in an effort to persuade them to purchase shares in a company in order to drive up the price of those shares, and then the perpetrators selling their shares while the price is still high.
As soon as the con artists sell their shares and stop increasing the price of the shares, the value will ultimately fall, and defenseless investors will end up losing money as a result.
This could also have the consequence of leading the defenseless buyers of the hijacked businesses to become entangled in an investigative process, exposing the corporation to trading suspensions and financial penalties, and making it more difficult and expensive for the valid shareholders and management to take back control of the hijacked organization because it may involve a protracted legal dispute.
Microscopically speaking, the companies that have been hijacked not only forfeit their earnings and their customers, but they also face the prospect of costly and lengthy civil lawsuits to deal with the takeover. The macroeconomic impact of increased company takeovers has a negative effect on the country’s appeal to foreign investors because the country is viewed as a higher risk for investments as the percentage of company takeovers increases.
It is also important to note that international corporations with subsidiary companies in South Africa but whose board of directors is comprised of individuals from outside the country are prime targets for fraudsters. Therefore, as a precautionary measure, it is recommended to assign a local councilor as a director of the organization.
Businesses ought to take more initiative by educating themselves on the risks linked to corporate hijacking and the red flags that can indicate an attack is imminent. They need to ensure that they conduct thorough background checks on all of their customers, staff members, and other business associates by putting in place meaningful controls designed to reduce the likelihood of fraud.
Large and well-known organizations are targets for company hijackers, and one way for hijackers to gain access to the target firms is through the company’s employees.
Because of this, businesses must conduct substantial background checks on potential employees before hiring them. Businesses must cultivate an environment that enables employees to report fraud within the company. Given that far more than 50% of these types of scams are unearthed as a consequence of tips from employees.
Establishing an electronic mailbox that will start receiving all alerts from CIPC on the occasion that modifications are made to the company’s data and records is an additional preventative measure that businesses can take to safeguard themselves against the risk of being hijacked. This provides companies with the ability to supervise changes, take prompt action, prevent the registration of incorrect information, and oversee bank alerts of unauthorized transactions. Controlling fraud risk ought to be a top focus for all business owners because it will inevitably safeguard them from the serious consequences that result from being a target of fraudulent behavior. Businesses must be on guard at all times.