As new U.S. tariffs hit Canadian goods, many companies are scrambling to reassess their supply chains. But the rush to swap suppliers may create even greater risks than the tariffs themselves.
“Some suppliers, when we are changing the supply chain, they might misrepresent themselves about their products,” says Myriam Duguay, partner and national forensic leader at KPMG in Canada. “They tell you, ‘I have a patent product,’ and it’s not true — it’s a copy. And then you will receive complaints from your customers.”
Fraud in the supply chain isn’t a hypothetical threat. According to KPMG, when companies shift suppliers under pressure — especially with minimal vetting — it opens the door to misrepresentation, financial fraud, and even cybercrime. The result? Businesses may find themselves fighting on two fronts: tariffs on one side, and fraud on the other.
The hidden risks of moving too quickly
In a recent release, KPMG emphasized that proper due diligence is a crucial safeguard that is often dropped when companies are reacting fast. That haste — often driven by a desire to avoid layoffs or protect margins — creates an environment where mistakes are easy to make and hard to unwind.
“You remove some preventive controls, and you do not do proper third-party due diligence,” says Duguay. “Then you open the door to fraudsters.”
She outlines three common fraud scenarios that can occur during a rushed supplier transition:
- Misrepresentation of goods: A supplier claims to be offering patented or Canadian-made products, when in fact they are counterfeit or from a different origin.
- Business email compromise or imposter fraud: A fraudster calls accounting pretending to be the supplier, says they’ve changed their bank account, and diverts payments.
- Payment scams: A fake supplier asks for advance payment — and the goods never arrive.
These risks are amplified when businesses skip basic checks, especially around the integrity of their partners.
What businesses can do right now
Supplier fraud is more than a multinational problem — it can hit small and mid-sized businesses, too. Duguay says there are tangible steps any business can take, even without a large legal or compliance team.
“You need to make sure that you will cover all these aspects to associate yourself with a reliable supplier.”
Here’s a starting point for businesses navigating a supplier change:
- Run a thorough due diligence check: This includes legal, cyber, and integrity due diligence. Look into who owns the company, whether they have legal or regulatory issues, and confirm product origin and patents.
- Train your accounting team: Teach them to be suspicious of any sudden changes in banking information. Duguay says one of the most effective protections costs nothing: “If someone is calling you, you need to take the information and then you can, for instance, send an email to your contact that you have in your records, or you can call your supplier with your own contact information that you have to validate the information.”
- Keep monitoring your suppliers: Even after onboarding, things can change. For example, she says, they may change their shareholders or have financial difficulties. “You still need to monitor this supplier to make sure that it’s going to be a good third party relationship,” she added.
Duguay also advises including the right to audit in supplier contracts, giving you permission to go to the supplier if anything looks suspicious.
These details can help businesses respond if fraud does occur — or ideally, prevent it altogether.
Some industries are more exposed
Duguay points to industries like automotive, pork, and fishing as being especially vulnerable, given their exposure to cross-border trade and recent tariff changes.
And it’s not just U.S. policy at play. China has recently imposed tariffs on Canadian goods.
Ultimately, as supply chains shift globally, Canadian companies could find themselves working with unfamiliar suppliers in unfamiliar jurisdictions, adding another layer of complexity and risk.
It doesn’t have to cost a fortune
Fraud protection doesn’t have to be expensive or bureaucratic. Sometimes it’s as simple as slowing down the payment process.
“This is free,” says Duguay. “You just have to make sure that you will talk to the right person or send an email to the right person before issuing payments.”
Whether you’re a large enterprise or a startup without a legal department, Duguay says the same principle applies: don’t let urgency compromise your internal controls.
“When you [make] a decision to change … it gives an opportunity to defraud your company,” she says.
The cost of fraud is often far higher than the cost of caution — and in today’s trade climate, businesses can’t afford to skip either.
This article was created with the assistance of AI. Learn more about our AI ethics policy here.
