Fraud investigators raise alarm on emerging trend in business fraud

Following the ATO’s partnership with the Australian Financial Crimes Exchange to fight against identity fraud and financial crime in August last year, business fraud has reached new lows amid increasing complexity, with criminals instead taking control of dormant legitimate companies to pass standard onboarding and verification checks.

BDO forensic services partner Stan Gallo (pictured) said this trend led to new investigations across the small- and mid-market sector, where forensic teams were called to matters involving legitimately registered Australian companies with a clean ASIC history and an active ABN being used for fraud.

The registration history for these shelf companies appears clean with properly recorded directors at the time of verification.

“What we’re seeing is a shift away from obviously false entities to the misuse of real, established companies that have either been quietly acquired, repurposed, or had their control compromised,” Gallo said.

“An aged Australian company with no compliance issues now has resale value in criminal markets. That’s a structural vulnerability.”

Gallo noted that more cases are arising where shelf companies are reactivated to submit high-value invoices, enter procurement systems, apply for finance and government-linked funding, and submit GST refund claims.

Verification processes, he added, fail to confirm who actually controls companies. Instead, they only confirm that the company exists and is appropriately registered and recorded, and that age and registration status are being weaponised by criminals as a proxy for trust.

He said the commoditisation of corporate identities on encrypted forums and messaging platforms has “lowered the barrier to entry for organised fraud groups seeking credibility”.

“We’re seeing real financial losses where governance frameworks were technically followed but still failed.”

“Corporate identity integrity is becoming a distinct risk category, and businesses need to adapt their controls accordingly.”