How to Check If a Company is Legitimate?

Thanks to the internet, anyone from anywhere can find a company for their needs. However, this accessibility also paved the way for some problems. In this post, we will talk about one of the major issues of the internet: Fake companies. It is possible to see their prevalence in the news as well, let’s give a recent example. According to ctpost, imposters had used a business’s name and address to create their own websites to con customers. It is possible to come across several news like this every year but it is also possible to avoid these scams. So, we will mention how you can use the internet against these threats. 

How to Verify a Company’s Legitimacy Online

1- Check Business Registration and Licensing

The first thing you should do is to check their business registration and licensing. In order to find these, you should search national registries such as Companies House and SEC. Then see whether the company name, ID, status and incorporating date match or not. In this part, we consider not listed and mismatched data as red flags. You can take the first step the see if a company is a scammer or not...

2- Review the Company’s Website

The next step is about the company’s website. First, look for domain registration in order to find out their age and ownership, legal pages and SSL (“https”). Then, ask yourself questions such as: “Does the website look professionally designed?”, “Is information on the website correct and well-written?”, “Is there a privacy policy/terms of service?”, “Do the links work?”… 

3- Search for Online Reviews and Complaints

You can use websites such as Trustpilot, BBB, Google and SiteJabber. Even though comments by bots and generic reviews are very prevalent, it is possible to differentiate fake ones from genuine ones. They may be written in similar tones, they may sound extremely robotic or they could come from recently created accounts. However, these are not the only warning signs you should be looking for. If the responses to refund/delivery complaints are lacking, this makes one big red flag. Several authorities have been taking deterrent measures for this. For example, last year FTC announced a rule that aims to prohibit the sale of fake reviews and testimonials, as well as seeking civil penalties.

4- Analyze the Company’s Digital Footprint

Companies usually use several social media platforms such as Linkedin, Instagram, Twitter and Facebook. If they do and appear active on these, this is an important indicator of their legitimacy. However, this is not enough to reach a conclusion. You should also look for verified profiles and active employee presence. 

5 - Confirm Contact Information

Contact information can also give away a lot. See if the company listed a real office address and verify this address with Google Maps. Aside from its location, you can test phone numbers and e-mails to see if you can get a real-time response. Disconnected numbers and unprofessional-looking e-mails can be indicators of fraud. Also, a website lacking any contact information or solely having a generic contact form, is not a good sign. 

6 - Check for Legal Disputes or Blacklists

You can access several official databases, such as OFAC, UN, EU sanctions or court databases. If the company is in these lists or fraud registries, it is a sign of danger.

7 - Use Verification Tools and Databases

Among the tools you can try; OpenCorporates for global business registries, ScamAdviser for website trust analysis, and WHOIS Lookup for domain ownership and age. Through such databases; you should check the domain creation dates, registration transparency and ownership data. If the domain appears to be new or the details are anonymized, it’s no good. 

What Are the Red Flags That May Signal a Fraudulent or High-Risk Company?

You may see a company that advertises decades of experience, just to find out they are just incorporated. This is one of the major indicators of fraud that you can come across. You must check all of their details, from domain registration to customer reviews in order to be sure everything is consistent. As we have mentioned before, details regarding their ownership may give some hints about the company’s legitimacy. Sometimes this may come up as no clear ultimate beneficial owner (UBO) or using offshore entities to obscure control. 

Also, the address information can reveal a lot. There can be multiple unrelated companies registered at the same location or, simply they may not have an address at all. Moreover, fraudsters are known to push clients to make transactions immediately. If they insist you on making a decision rapidly, or offer deals that are “too good to be true”, you should reject these immediately. A reliable company would give time for you to review the details and make a sound decision. 

When you ask legitimate firms to provide incorporation certificates, licenses, tax IDs or information about their UBOs, they usually provide you with the details but illegitimate companies may avoid these, provide vague answers or straight out refuse. 

Can I Check a Company for Free?

Luckily, there are several resources that you can benefit from. Most countries have online databases that you can look up any company information in detail. For websites, you can check when was the company’s website created and other details on WHOIS. There are also tools such as ScamAdviser, ScamAnalytics which analyze websites for trustworthiness based on several metrics such as domain age, server location, traffic patterns etc. 

What Tools Can Help You Verify a Business?

The tools that you will use when verifying a business depend largely on the size and the needs of your firm. Below, we will list the most prominent ones so that you can find the ones you will need. 

• OpenCorporates - company registry search: OpenCorporates is the world’s largest open legal-entity database, which sources from national business registries of over 140 jurisdictions.

• WHOIS Lookup – domain age & ownership: On WHOIS, users can see who a certain domain or IP address belongs to. 

• ScamAdviser – trust score: ScamAdviser is a website that helps over 3 million users every month to see if a website is a scam. 

• Google Business Profile – Reviews, location: Google Business Profile is one of the quickest ways a customer can check feedback, addresses, and other indicators of legitimacy. 

• BBB / Trustpilot / SiteJabber – user complaints: These websites allow customers to share complaints and reviews, in which one can find several indicators of legitimacy. 

• LinkedIn – employee presence, legitimacy: LinkedIn is one of the most useful tools when verifying the legitimacy of a business. Factors like the activity level of a page and the presence of employees give away a lot of signs.

• FATF / OFAC / EU Lists – sanctions & blacklist screening: These lists are also among the first things to check when verifying a business. 

• Sanction Scanner – KYB, UBO check: You can directly use software that conducts Know Your Business and Ultimate Beneficial Owner checks, such as Sanction Scanner. 

How to Report a Scammer Business Online?

Let’s say that you have come across a suspicious business and you are left wondering where you can report it. In fact, there is more than one authority responsible for receiving reports of suspicious businesses. 

First of all, there are national consumer protection agencies, which obviously depend on your jurisdiction. For example, if you are in the U.S., this agency is the Federal Trade Commission, to which you can report it through https://reportfraud.ftc.gov/.  If you are in the EU, you can use the European Consumer Centers. If you operate in another jurisdiction, you can often find the relevant authority on your government’s official consumer protection authority website. 

Moreover, you can use online platforms like the ones we have mentioned in the previous paragraphs, such as Better Business Bureau, Trustpilot, or SiteJabber. Also, several websites such as Google Business, Amazon, eBay, Facebook, and LinkedIn, feature built-in reporting tools. So, do not hesitate to use these tools, since they are among the most efficient actions you can take. Furthermore, if you see that a website uses falsified domain ownership information, then you should report it to WHOIS. Lastly if you notice that an entity is listed on sanctions lists such as those of OFAC or the EU, we strongly suggest contacting the relevant sanction reporting channels as well.  

What Are the Signs a Company is a Scam?

There are several indicators such as a newly registered domain, no contact info, hidden or complex ownership, poor online presence, unaddressed negative reviews and complaints, generic website, multiple companies at the same address, unrealistic claims, demanding upfront payments…

How Sanction Scanner Helps You?

Sanction Scanner’s solutions involve screening companies and individuals in real-time against sanctions, PEP check (Politically Exposed Persons), adverse media and Know Your Business. This way, you can spot any fake ownership, virtual office scam, or legal risk even before you start onboarding. This is very important because it is impossible to know where hidden/complex ownership structures, shell companies and high-risk associations may come up.