According to the 2018 Global Study on Occupational Fraud and Abuse from the Association of Certified Fraud Examiners, the average organization loses 5% of its revenues to fraud each year – translating to a staggering $4 trillion in potential fraud losses worldwide annually.
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What can Accounts Payable professionals do to prevent their companies from being a part of this statistic? At our Client Roundtable event in St. Louis, we spoke with AP professionals who are facing these challenges each day. We talked about the most common types of problems they see and what steps can be taken in an effort to prevent fraudulent payments.
Long gone are the days of the Nigerian prince email scam. Email scammers today are smart and polished, tricking even the most seasoned of AP professionals. A common scam is to duplicate a vendor email: Everything from the email alias down to the signature line are spot-on matches for the legitimate vendor. This copycat email will request a change to the ACH (automated clearing house) bank account where they receive payments. Once the change is made, the payments go straight to the scammer’s bank account, rather than the vendor’s account. Because the email looks official – correct logos/names and no grammar or spelling mistakes – it’s easy to assume it is a genuine email from a vendor until it’s too late.
In addition, ACH transactions have historically been an attractive option for submitting payment to vendors. Because the transactions are processed electronically, there is no need to worry about the safety of physical checks. It’s fast, often with same-day turnarounds. It’s secure – but it’s not immune to fraud, unfortunately. ACH transactions are vulnerable to hacks and computer security breaches due to their electronic nature.
How to Protect Your Company
Scammers are getting better with every attempt, but there are steps you can take to make sure you aren’t their next victim. Any time a change is requested from a vendor, especially one that affects bank account information, confirm with your vendor. Don’t use the phone number listed in the email; find an externally verifiable phone number to confirm the change.
Using a Vendor Setup and Maintenance tool can also help protect your company from fraud. This gives vendors a secure way to update and maintain their current information in your system with secure login credentials, while still allowing you to deploy proper verification protocols.
It’s a good idea to take steps to protect your company internally, too. According to the Association of Certified Fraud Examiners’ 2018 report, internal control weaknesses are responsible for nearly half of frauds. Ensure that you have appropriate segregation of duties, based on your organization size, to prevent fraud from being initiated internally. Confirm that your company has strong internal security measures in place. Train your staff on best practices: never sharing passwords, never clicking on suspicious links or opening unknown files, and locking workstations when unattended, among other standard security procedures. If you see any suspicious transactions or requests, report it to your bank or financial institution immediately.
Using AP Automation to Fight Fraud
Unfortunately, these are not the only scams out there, and these tips represent only a small portion of what can be done in the fight against AP fraud. Scammers are getting smarter and craftier. Their tricks aren’t always obvious, so constant vigilance is necessary.
AP automation is a necessary tool in the battle against fraudulent payments. Regular audits are essential to uncovering fraud, and AP automation provides transparent, easy access to the documents and data needed for audits. In addition to simple search and recovery of invoices, AP automation platforms also can provide important data points to auditors, such as suspicious logins or invoice amounts that are rounded to the nearest dollar.
AP automation solutions also can provide strict controls that will reduce vulnerabilities to fraud. By setting up access controls, you can ensure only personnel with specific authorization can view or make changes to documents and data in the system. Preset approval limits will ensure that invoice amounts over a certain threshold will be routed to the correct approvers. By running reports for invoices that fall just under that threshold, you may be able to uncover red flags that point to internal fraud.
There is no exact science to fighting AP fraud, but by implementing the right tools and strategies, you can help reduce opportunities for it to happen.
Are you ready to fight fraud with AP automation? Contact us.