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Due Diligence, China

The Task

To review a contract and correspondence between a UK SME and a Chinese customer.

The Work

A well established factory in the mould, tool and die sector had been in correspondence with a Chinese company which had placed a large order with them. The senior management were planning to fly to China to clarify the production details and sign the contract, but decided to seek advice first.

A routine review of the correspondence and contract indicated a strong likelihood of fraudulent behaviour, especially the facts that:

Some stipulations outlined as regulatory requirements in the contract were not in accordance to standard business practice in China
Discrepancies between the English and Chinese language wording of the contract effectively nullified any contractual obligations for the Chinese side
These suspicions were confirmed by some brief follow-up research – in particular the fact that Chinese court records showed a string of prior claims made against the company.

The Outcome

The order was identified as a notary fee scam, saving the client several thousand pounds in travel costs, as well as significantly higher losses had the deal proceeded any further.

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