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Accounts Payable Fraud

The scourge of businesses

Security, which involves preventing and fighting fraud - especially for documents - is a topic that continues to grow in today’s world of ongoing digital transformation. Warning lights are flashing red at many companies: The Association of Certified Fraud Examiners reports that U.S. Businesses lost in 2019 an average of 5% of their gross revenues to fraud.
blog-invoice fraud

What is invoice fraud?

 
Despite the implementation of increasingly sophisticated mechanisms, corporate fraud continues to gain ground, as illustrated by data that is both surprising and worrisome: half of all UK companies have been victims of fraud in the past two years, according to a survey conducted by PwC.
 
It is important to note that not all companies are on equal footing when it comes to their fight against fraud. The human, organizational, and financial means implemented for protection will be different for a small, medium, or large entreprises.
 

Nonetheless, two indisputable facts can be mentioned: on one hand, no company can escape the danger of fraud; on the other hand, there is no direct connection between company size and the monetary amounts of fraud. It is also observed that the human factor is both an Achilles heel for the company and its savior. In fact, most fraud attempts are defeated by human intervention.

 

While digital transformation has been a strong boost for productivity within companies, it also opened a new window through which fraudsters—ever more well informed and better organized—can enter; the two are intrinsically linked with each other.

 

Warning lights are flashing red at many companies: half of all UK companies have been victims of fraud in the past two years, according to a survey conducted by PwC. The research found that for more than half of the organisations affected, criminal activity resulted in losses of over $100,000, and almost a quarter of UK victims admitted to losing more than £720,000.


Nonetheless, awareness regarding this reality has yet to be followed through with actions. Most organizations do not have a contingency plan that they can activate in case fraud occurs, despite the considerable risks: Financial impact is at the top of the list, followed closely by data theft and potential impact on the company’s reputation.


Companies with a proactive approach gain many benefits, including: Greater loyalty from their clients; reduced operating costs; better brand image for their company; and promotion of their brand value as an employer.

 

 

 

 

fraud uk

Invoice finance fraud : how can CFOs lead the fight against fraud ?

 

Responsible for the company’s financial health, the CFO is therefore explicitly involved with any losses caused by fraud, naturally on the front-line for leading the fight!

 

CFOs are the guardians of financial information and are therefore ideally positioned to administer a solution. They are the ones who diagnose the problem and mobilize all available resources to mitigate and ultimately prevent fraud.

 

Chief Financial Officers in all business sectors have always provided a critical service in managing risk for their company, notably thanks to their advisory position and responsibility as a stakeholder, as well as their ability to clarify and facilitate business decisions, and their in-depth knowledge of company organization and cash management thanks to data analysis.  

 

Their job is no longer limited to crunching numbers. They now fill a need to safeguard and nurture a business through unprecedented perils of loss and potential consequences for customers. The company’s finance director must adapt freshly learnt skills to spot innovative and more aggressive cheating, notably for invoice finance fraud, beyond traditional forms such as internal embezzlement and industrial espionage. 

 

"Our technologies are used to detect falsification on various types of documents, such as pay slips, identity documents, proof of address, etc.

Pay slips are a very real example. By implementing steganographic analysis technologies, we can detect whether information such as numbers, dates, names, or salary amount were modified."

Jean-Marc Pédréno, Chief Technical Officer, Yooz.

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Invoice Fraud detection: what are the tools to fight against fraud?

 
Opportunities for fraud may arise from vulnerabilities in processes. In many cases, these vulnerabilities may be “easily” rectified by automating time-consuming and repetitive tasks that are sources for errors. Chief Financial Officers who have adopted automation also see an additional opportunity to enable their team to focus their effort on statistical analysis, risk prevention and strategic consulting.
 
One of the key pillars for invoice fraud detection is technology :
 
  • Technologies are at the origin of modernization and digitization within companies.
  • Technologies help finance departments systematize fraud detection.
  • Technologies offer more “firepower” against fraud and enable adaptation that is not
    offered by more traditional methods.

The most advanced technologies in this battle are Big Data, machine learning and digitization. Big data enables handling vast volumes of information, often in real-time. Machine learning is a component of artificial intelligence in its broader meaning, seeking to create and use algorithms to obtain predictive analysis based on data. Together, they make it possible for the company to go even further, such as risk scoring its clients and suppliers.
 
Digitization, or automation, technologies that leverage AI are the other essential tools and an important part of any effort to mitigate risks. It not only increases speed, but it also reduces costs and improves agility. Creating and organizing a rigorous process that includes complete traceability and security makes these solutions extremely effective in fighting fraud.
 
Companies and their finance departments can leverage all of these advanced technologies to stay one step ahead of fraud and its ever more challenging landscape.
 

Did you know?

Data, which has become an undisputed source of value for the company’s strategic growth decisions, is now also the cornerstone for finance departments, nonetheless introducing risks related to data integrity and security. CFOs need to work with experts to master this data science and therefore rise to the occasion in their effort to fight fraud and improve reporting.
 
The 2019 PwC report confirms this trend, stating that CFOs in 2019 were convinced of the need to surround themselves with new talent, people with technical-operational profiles able to master software robots. This includes data scientists, business analysts, and more.
fraud detection

The most advanced AP Automation solutions use a variety of different artificial intelligence technologies that enable finance and accounting teams to make their processes more secure and more reliable.

 

These expert systems are involved from document capture, the very first step in the document automation process, to detect fraudulent types of behavior. Examples include using steganographic shape and metadata analysis to detect modified information on an invoice by tracking down any changes made in the image, such as bank details, which is one of the leading sources of invoice fraud. Steganographic methods include a frequency analysis component that detects falsified information by identifying changes made to an image, such as amounts, dates, or names.

 

These technologies integrate powerful algorithms that can not only adapt to all types of documents – even those with variable structure – but also learn from examples and create their own knowledge base. For example, statistical analysis can detect monetary amounts that are out of the ordinary with respect to known data in supplier history. Solution users can then be alerted if amounts higher than usual are found. This type of technology also detects suspected duplicates, that is, invoices with the same numbers and supplier names.

 

Accounts Payable Fraud

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