Helping an Australian importer to restore secure trading relations with their Chinese supplier

Challenge

Meg and Mark Lewis are owners of K9+soft dog crates  , a company that imports dog and pet products.Since establishing their business in 2006, Meg and Mark have sourced their soft dog crates from one supplier in China.

“Over the past decade, all of our dealings with the supplier have been via email to a contact at the factory called ‘Frank’,” said Meg. “We’ve ordered goods from them many times and although the quality has varied a little from time to time, overall it’s been a relatively trouble-free relationship.”

In February 2015, Frank emailed Meg saying he needed her to use a different email address for him as he was having trouble with the previous one she had been using.

The request seemed reasonable and Meg was happy to comply.

In the ensuing weeks however, Frank changed his email address several more times. There were occasional slight variations in his communication style, but not enough to cause real concern, and he continued to sign off as he always did, “Rgds, Frank” so all seemed well.

“We were expecting a shipment to arrive in Australia in April,” said Meg. “As the shipping date approached, Frank sent instructions for me to pay AUD $7,500 (the final 50% payment due) to a different bank account than they had used before. As changes in bank accounts had happened from time to time over the years, this didn’t seem out of the ordinary.”

Meg made the payment as requested and it took around a week to go through, during which time Frank seemed unusually anxious in his correspondence.

After the money had gone through, Frank wrote again, this time saying the taxation department had taken funds from the company’s account, leaving them short to cover the cost of freight. He asked Meg to send another $3,500 to a Western Union account. However the account holder’s name didn’t sound Chinese, and it seemed more like a West African name.

“By this point alarm bells were ringing for us because we organise and pay for our own freight, and we didn’t think the real Frank would be sharing a tax issue with us,” said Meg. “We figured that the person we were now dealing with was someone who had hacked Frank’s email account.”

Meg and Mark refused to pay the additional funds, and the hacker continued to contact them for weeks after the fraud was discovered, each time reducing the amount he was asking for and coming up with a new story wrapped around each request.

“From the time we realised the hacking had taken place, we tried to contact our actual supplier. But because we don’t speak Chinese, and our supplier doesn’t speak English, we could only communicate via email and we were no longer sure which was the correct address,” said Meg. “Each time, the person responding would assure us they were the genuine Frank. But then another email would come that made us realise it wasn’t.”

It was a tough time for Meg and Mark who desperately wanted to get their relationship back on track with their supplier. They also needed to get hold of the goods on order and wanted to try to reclaim the missing payment if possible.

“It was a nightmare and we felt completely lost and stuck at this point,” recalls Meg. “We didn’t know who we could trust anymore and we urgently needed help to untangle the mess.”

Assistance came in the form of a friend who knew of Carsten Primdal and his company, Vantage Compliance and Mitigation, and who put them in touch.

Solution

Prior to connecting with Carsten, Meg had imagined she needed someone with expertise in dealing with email hacking to sort out their difficulties.

“I didn’t know there was a business like Carsten’s that specialises in helping businesses to avoid or fix problems in their trading with China,” said Meg. “When he explained what he did, I knew we had found exactly the right person who could help us.”

Initially Meg had a phone call with Carsten where she explained what had taken place.

“Straight away I could tell that Carsten completely understood our concerns, and also the nature of what had gone on,” she said.

Next Meg forwarded Carsten the email trail and details of the most recent payment.

Carsten and his team reviewed the information and pieced together details of what had occurred. They also researched various databases in China to understand and verify the history of company and factory registration details, as these had changed several times during the course of Meg and Mark’s dealings with the supplier over the years.

A team member of Carsten’s who speaks fluent Chinese made a series of phone calls to the factory as well as to the agent who manages their exports. As a tactic, she rang a few times, seemingly to ask additional questions, but in fact paraphrasing the same questions to test if the response was consistent.

“Beyond this, we needed additional information from the supplier and we sent Meg a list of requirements written in Chinese for her to forward so there would be no chance of miscommunication,” said Carsten. “Once the supplier responded, we were able to construct a full report on what had taken place.”

The report summarised the sequence of events that had occurred. It established that Frank’s email account had indeed been hacked and that Meg had been communicating with an external party in the time since. It seemed the hacker had been copying and pasting text from the real Frank’s emails to mimic his style. At the same time, the hacker had also been communicating with the factory pretending to be Meg, copying wording from her emails to reduce suspicion.

“Our research enabled us to identify the correct chain of entities that are involved in the supply of goods to Meg and Mark, including the producer and export agent, along with their proper contact details,” said Carsten. “We also verified that Frank is a real person from the supplier’s company, and we made a number of recommendations that will help ensure Meg and Mark’s future emails reach Frank’s correct email address.”

Bank account details for the legitimate supplier and export agent were also verified, however tracking down and returning the lost payment proved more difficult.

“Unfortunately, trying to pursue the missing payment is quite costly and unlikely to result in the money being returned,” said Carsten. “We were able to ascertain the registration date for the company to whom the money was transferred, but beyond this, the external fees for sourcing this information are likely to outweigh the money that’s lost.”

The report also set out a series of measures that Meg and Mark can take to reduce the risk of problems occurring again down the track. This included setting up supplier profiles, locking down details and other practices to be adopted to help safeguard future financial transactions.

Outcome

Meg said she and Mark feel incredibly relieved to be able to move forward again with their relationship with their supplier.

“Before we came into contact with Carsten, Mark and I didn’t know who to turn to for help,” said Meg. “Our soft dog crates are a key part of our business and we wanted to continue dealing with our original supplier as before. After the hacking had occurred, we no longer knew who we could trust.”

After speaking with Carsten for the first time, Meg felt hopeful there could be a solution.

“Carsten really empathised with our situation and his communication with us was fantastic,” said Meg. “He took the time to address each concern we raised, point by point, and didn’t gloss over the detail. This was very reassuring to us.”

Meg said she appreciated how quickly Carsten was able to come back to her with preliminary information, with the final report sent to her around a fortnight after the initial contact.

“We’re much clearer now about who we are dealing with and steps we can take to prevent this kind of trouble happening again,” said Meg. “Carsten and his company have been a bridge between us and our supplier in China. He is still helping us re-establish our business relationship with Frank and we now feel everything is likely to be OK.”

In the course of their conversations, Carsten also explained to Meg the differences that exist between Chinese and Western communication styles, and how these can create misunderstandings.

“Not only did Carsten help us solve our recent crisis, but he also shared his knowledge about how we can communicate more effectively with our supplier and not misinterpret their communications with us,” said Meg. “Through his help, we feel our relationship with our supplier will be on stronger footing in the future.”