News

Invoice fraud becoming a significant problem
22 July 2024

Invoice fraud, affecting one in three companies, involves deceptive practices that trick businesses into making payments to fraudulent accounts.

As fraudsters’ techniques become more sophisticated, businesses must understand their tactics and the potential impact on operations.

Here are some common techniques used by fraudsters:

• Fake invoices: Fraudsters create counterfeit invoices that appear legitimate. They might use details from a genuine supplier, making it difficult to distinguish between real and fake invoices.

• Business email compromise (BEC): In this technique, fraudsters hack into or spoof a legitimate business email account. They then send emails that appear to be from trusted suppliers or senior executives, requesting urgent payments to new bank accounts.

• Phishing attacks: Fraudsters use phishing emails to trick employees into divulging sensitive information, such as login credentials or financial details. This information is then used to carry out fraudulent activities.

• Change of bank details: Fraudsters pose as legitimate suppliers and inform companies of a change in bank account details. Unsuspecting employees then update the payment information, redirecting funds to the fraudster’s account.

While these may seem fairly simple tricks, they are often elaborate and complex with many underlying layers of deception.

The effects of invoice fraud

Invoice fraud leads to immediate financial losses from payments to fraudulent accounts, which are often difficult to recover.

It also results in time-consuming and resource-intensive fraud investigations that disrupt business operations and delay legitimate payments.

Additionally, falling victim to fraud can damage a company’s reputation, eroding trust among clients, suppliers, and stakeholders, and may lead to legal consequences, including fines and regulatory scrutiny.

Strategies for mitigating the risks

We often recommend protecting your company from invoice fraud, by implementing the following strategies:

• Employee training and awareness: Educate your staff about the common techniques used by fraudsters and the importance of verifying payment requests. Regular training sessions can help employees recognise and respond to potential threats.

• Verification processes: Establish robust verification processes for any changes in payment details. Always verify new or changed bank account information directly with the supplier using a known, trusted contact method.

• Use technology: Implement fraud detection software that can flag unusual payment requests or changes in supplier details. Ensure your email systems are secure and regularly updated to prevent BEC attacks.

• Segregation of duties: Divide financial responsibilities among multiple employees. This separation can help detect and prevent fraudulent activities.

• Regular audits: Regularly audit your accounts payable processes and supplier information. This can help identify any irregularities or discrepancies that may indicate fraud.

Speak to our team if you’re worried about this issue, we can help you implement robust financial checks that help to protect you.

Please get in touch for more information.