Is your business partner who they say they are – be aware of 3rd party risks

3rd party fraud and risk is bleeding many logistics services providers mainly small and medium-sized enterprises (SMMEs) in global trade with some losing more than USD 200,000 in just 6 months and many facing at least 3 different types of fraud in the same period..

The message is clear: 3rd party risk is not a theoretical concern, it is an urgent financial threat..

How 3rd party fraud hits SMMEs

For SMMEs, 3rd party relationships are essential to global trade.. Most rely on partner freight forwarders, overseas agents, or digital platforms to manage shipments in markets where they have no physical presence..

But these same dependencies are being exploited by fraudsters..

• Impersonation schemes: Criminals pose as trusted agents or carriers, issue fake documents, collect payments, and vanish before cargo is even picked up
• Double-brokering scams: A legitimate booking is secretly passed to another broker or forwarder, creating duplicate charges or stolen loads
• Fabricated surcharges: Hidden “documentation fees” or customs add-ons appear on invoices without basis, leaving SMMEs paying inflated bills
• Sanctioned entity exposure: Partnering unknowingly with blacklisted firms can result in frozen payments or legal penalties

Large enterprises can absorb such shocks or have compliance departments to vet partners.. SMMEs, with limited cash flow and fewer in-house checks, often discover too late that the “trusted” partner was never legitimate..

Why verification is no longer optional

Skipping due diligence to save time is tempting when a shipment is urgent. Yet, the costs of fraud dwarf any upfront savings.. Consider:

• Cash flow impact: A single fraudulent invoice of USD 50,000–100,000 can wipe out an SMME’s margin for months
• Reputational damage: Customers blame the exporter/importer for delayed cargo, not the fraudulent agent
• Compliance risks: Transactions with fraudulent or sanctioned entities can expose companies to customs penalties and banking scrutiny

As the TIA report shows, SMMEs are now the primary targets precisely because they lack the resources of larger competitors..

Red flags in 3rd party risk

Some common warning signs include:

• Partners unwilling to provide verifiable company registration or tax IDs
• Email or website domains that do not match official company records
• Requests for payment to accounts in unrelated countries or mismatched names
• Rates that seem “too good to be true” compared with market benchmarks
• Pressure for upfront full payments without contractual guarantees

Even simple checks, like cross-verifying business addresses, reviewing online complaints, or confirming memberships in recognised trade associations, can filter out a large portion of fraudulent players..

What SMMEs can do

To protect themselves, SMMEs must formalise their vetting process rather than leaving it to instinct or urgency.. Practical steps include:

1. Adopt a Trade Partner Vetting Toolkit – Use a structured checklist to evaluate forwarders, agents, and digital platforms
2. Verify financial details – Confirm that bank accounts belong to the entity under contract
3. Leverage technology – Screening services can flag sanctioned or high-risk entities in real time
4. Document everything – Keep a record of due diligence to demonstrate compliance and protect against liability
5. Engage external experts – If in-house capacity is lacking, partner with a consultancy like HM Business Solutions for independent screening

How HM Business Solutions helps

At HM Business Solutions (HMBS), we help SMMEs navigate the growing risks of 3rd party fraud in global trade.. Our services include:

• Guidance on due diligence checks
• Guided risk screening to streamline internal verification
• Workshops and training for teams to recognise fraud red flags
• Ongoing monitoring support to ensure trade partners remain compliant over time

We bring industry experience and practical tools designed for businesses that cannot afford a dedicated compliance department..

Conclusion

Fraud is evolving, and so must risk management.. From impersonated brokers to double-brokering scams, the evidence is overwhelming: 3rd risks are costing SMMEs billions globally..

The question is no longer if you should verify your trade partners, but how quickly you can embed structured due diligence into your business..

👉 Engage with HMBS today for a 5-Step Trade Partner Vetting Toolkit today for a tailored 3rd party screening service that safeguards your trade relationships and protects your bottom line.. Visit our Services page for more info..