Top 5 Fraud Schemes by Indian Suppliers — and How to Spot Them

Every year, businesses across the world lose hundreds of thousands — sometimes millions — of dollars due to dishonest Indian suppliers. The problem is not that India is an unreliable source of goods: on the contrary, India is one of the world's most dynamic manufacturing hubs. The problem is a lack of due diligence. Importers, eager to secure a competitive deal, skip verification steps that would have exposed the fraud before a single dollar was wired. This article breaks down the five most common fraud schemes you are likely to encounter, and explains exactly how to protect yourself. Learn more about our company and our experience working with Indian suppliers.

Scheme 1 — Fictitious Company Registration

This is arguably the most brazen scheme: a company exists only on paper. The fraudster registers a business with the Ministry of Corporate Affairs (MCA), creates a professional-looking website, lists a prestigious-sounding address in Mumbai or Delhi, and begins soliciting purchase orders. The company may even have an active GST number — which makes it appear legitimate to inexperienced buyers.

How it works: The buyer places an order, wires an advance payment (often 30–50% of the total), and then the supplier disappears. Phone numbers are disconnected, emails bounce, and the registered address turns out to be a rented mailbox or a shared co-working space with no manufacturing activity whatsoever.

What to check:

• GST number: Verify it on the official GST portal at gst.gov.in. Check that it is "Active" — not cancelled or suspended.
• CIN (Company Identification Number): Look up the company on the MCA21 portal (mca.gov.in). A legitimate company will have a registered director, filed annual returns, and paid-up capital details.
• Physical verification: Search the registered address on Google Maps Street View. If the address shows a residential building, a small shop, or an empty plot, investigate further.
• IEC Code: If the supplier claims to export, they must have a valid Importer-Exporter Code issued by DGFT. Verify it at the DGFT portal.

Scheme 2 — The Sample Switch

This scheme is more sophisticated and harder to detect in advance. The supplier sends you excellent product samples — exactly what you ordered in terms of quality, composition, and packaging. You approve the samples, sign the contract, and pay. The bulk shipment that arrives, however, is a completely different story: inferior raw materials, incorrect dimensions, poor stitching, incorrect formulations, or substandard chemical purity.

Why it happens: Samples are assembled by hand with top-grade materials specifically to win the order. Bulk production uses cheaper inputs to maximize margin. The supplier banks on the fact that by the time you discover the problem, the goods are already in your warehouse and returning them is prohibitively expensive.

Signs to watch for: Prices that are 20–30% below standard market rates, resistance to pre-shipment inspection, vague answers about the manufacturing process, and inability to produce batch test reports.

Protection: The single most effective countermeasure is a mandatory on-site pre-shipment inspection by an independent third party. This inspection must happen before the balance payment is released — and it must be conducted by someone other than the supplier's own QC team. SunPower Biotech conducts on-site pre-shipment inspections across India for $280 per visit.

Scheme 3 — The Ghost Middleman

You believe you are buying directly from a manufacturer, but in reality you are dealing with a trader who has no production facility of their own. The middleman marks up the price, acts as the factory, and presents factory photos, certificates, and technical specifications that belong to an actual manufacturer — one they may not even have a formal agreement with.

Consequences: When production problems arise, the middleman has no authority to resolve them. Quality complaints go unanswered, delivery timelines extend indefinitely, and any attempt at product customization is blocked. You also pay 15–40% more than if you had dealt with the manufacturer directly.

How to verify directly: Ask for a live, unannounced video call showing the production floor. Request the factory's own GST registration (it will show the manufacturer's name, not the trader's). Cross-reference the GST registration address with the factory address. Request the manufacturer's IEC code and verify it. If the supplier hedges, delays, or presents inconsistent documents, you are almost certainly dealing with a middleman.

Scheme 4 — Advance Without Return

This scheme targets importers who agree to pay 100% in advance — a practice that may seem unusual in Western trade, but which unscrupulous suppliers actively encourage. The supplier cites currency risk, production costs, or raw material procurement as reasons for requiring full prepayment. Once the money is received, they either disappear entirely or deliver a fraction of the order.

How to structure payments safely:

1. Advance (30% maximum): Paid to confirm the order and secure raw materials. Never pay more than 30% upfront.
2. After pre-shipment inspection (40%): Released only after an independent inspector has confirmed goods are ready and compliant.
3. On Bill of Lading (30%): Final payment against shipping documents, or via Letter of Credit for high-value orders.

If a supplier insists on 70% or 100% upfront and refuses any other arrangement, walk away. A legitimate manufacturer with real orders and banking relationships does not need full prepayment from first-time buyers.

Scheme 5 — Fake Certificates

India's regulatory framework includes dozens of certification bodies: FSSAI for food, BIS for standardisation, ISO for quality management, APEDA for agricultural exports, and many more. Forging these certificates has become alarmingly easy — a professional-looking PDF can be generated in minutes with a graphic design tool.

Buyers who rely on PDF copies of certificates without verification are exposed. Forged BIS certificates, fake FSSAI licenses, and counterfeit ISO certificates have all appeared in real transactions investigated by our team.

How to verify certificates:

• ISO: Verify through the issuing certification body's website (e.g., Bureau Veritas, TÜV, SGS have online certificate lookup tools).
• FSSAI: Check the license number on fssai.gov.in — all licensed food businesses are listed publicly.
• BIS: Verify ISI mark licenses at bis.gov.in → BIS Product Certification.
• APEDA: Check APEDA registration at apeda.gov.in.

Never accept a certificate solely in PDF form. Always cross-check the certificate number against the issuing authority's official public registry. Our article on FSSAI, BIS, and MSME licences explains how to verify each one. Protect yourself further by verifying the supplier's GST number and checking their contract terms using these 7 contract clauses.

What to Do If You Have Already Been Defrauded

If you have already lost money, do not panic — and do not assume the situation is hopeless. Several recovery avenues exist, depending on the amount and how much time has passed since the fraud occurred.

First, preserve all documentation: contracts, invoices, wire transfer confirmations, email correspondence, WhatsApp messages, and any calls or videos. This forms the evidentiary basis for any legal or negotiation action.

Second, act quickly. The faster you engage a professional representative on the ground in India, the better the chances of recovery. In-person presence in the supplier's city — whether Surat, Tiruppur, Delhi, or Mumbai — dramatically changes the negotiation dynamic.

Third, consider your legal options: a complaint to the Indian police (Cyber Crime Division), a notice through an Indian lawyer, or arbitration if your contract included an arbitration clause. SunPower Biotech has successfully facilitated the recovery of advance payments in multiple real cases through in-person negotiation without litigation.