How to check a foreign counterparty before paying

Getting back money that went abroad to the wrong recipient is slow and expensive. Sometimes it is impossible. That is why a supplier is checked before the first payment, not after the first problem. The payment agent checks the deal for legal compliance, but the reliability of the counterparty as a business partner remains your question. Below is a checking procedure that takes little time and removes most of the risks.

Registration: where to look, by country

First: the company exists, is active and is named exactly as in the contract. Almost every country has a public register.

• China. The National Enterprise Credit Information Publicity System. Each company has an 18-character unified social credit code. Check the status, registration date, legal representative and business scope: a trading company without the relevant business scope should raise concern.
• Hong Kong. The Companies Registry: status, registration date, name history.
• Turkey. The trade registry and its official gazette, where registrations and changes are published.
• The UAE. There is no single register: each emirate and each free zone has its own. Ask for the trade license and check its validity and licensed activities.
• The European Union. National trade registers. The VAT number is checked in the EU-wide VIES system.
• The United Kingdom. Companies House: status, directors, filings.
• India. The company register of the Ministry of Corporate Affairs: status, directors, share capital.

Ask the supplier for a certificate of registration or a recent extract and compare it with the register. Copies can be out of date: the company may have changed its name, address or director.

If the company is not in the register or the name differs by even one word, find out why before signing the contract.

Cross-checking the documents

Next, check that the documents describe the same company.

• The name in the contract, on the invoice and in the bank details is the same.
• The contract was signed by the director or by a person with a power of attorney. It is worth asking for the power of attorney.
• The bank’s country matches the company’s country. If a Chinese factory asks you to pay a company in Hong Kong, this can be normal, but you need a letter or agreement explaining the connection.
• If the seller is a trading company rather than the manufacturer, it is clear where it gets the goods.

Look at the external signs too. How old the website domain is, whether the email domain matches the company name, whether there is a production address. For a large first deal, a video call showing the production site, or a visit, tells you more than a catalog.

Discrepancies do not always mean fraud. But each of them will later come up as a bank’s question about the payment.

Signs of substituted bank details

The most common fraud scheme in foreign trade is not a fake supplier but a substituted account at a real one. The fraudster gains access to the mailbox or registers a similar domain and writes on the supplier’s behalf: “our bank has changed, pay here”.

Warning signs:

• a change of bank details by letter right before the payment;
• email on a free service or on a domain that differs by one letter;
• urgency and a discount for paying to the new account;
• the account is held by an individual or by a company in a third country;
• a request not to call but to correspond in writing.

What to do: confirm the change of bank details by calling a number you had before, not one from the new letter. Formalize the new details with an amendment or a signed letter on the company’s letterhead.

Sanctions lists and bank restrictions

Check the company and its owners against the sanctions lists applied by the banks on the payment route: those of the UN, the EU, the USA and the United Kingdom. A match on an owner can matter more than a match on the company itself.

The check is not only for the first payment. The lists are updated, and the supplier may change its owner or bank. Before a large payment under an old contract, it is worth running the check again.

A separate question: will the supplier’s bank accept a payment from your route? Ask the supplier whether it has received payments from Russia, in which currency and from which payer. The answer will help choose a route that the beneficiary’s bank will accept.

The first payment and forms of settlement

With a new supplier, it is sensible to start with a small batch. A proven channel and a completed first delivery give more confidence than any documents.

For large contracts, there are the letter of credit and escrow: the supplier receives the money only after the conditions are met. A bank letter of credit for companies from Russia is not available in every country and takes longer to arrange. In a deal through VEDmost, escrow is available on request: the roubles wait in a special account at a Russian bank until the payment is executed, for an additional fee. This does not replace checking the supplier.

What we check and what remains with you

Before preparing the payment order, VEDmost cross-checks the contract, the invoice and the bank details. We check whether the beneficiary, currency and amounts match, and whether there are signs of account substitution. We select an agent whose route to the supplier’s bank is working now.

Choosing the supplier and assessing it as a partner remain your decision. We do not give legal opinions on counterparties, but we will tell you if the documents do not match.

More on the payment side of the contract on the Contract support page. How the money is protected before execution is described on the Payment protection page.