By Lindsay Pinkos, Senior Product Marketing Manager at Kofax
Making money is the primary goal of just about every organisation—and there’s nothing wrong with that. But what about the dirty side of money? The “F” word in the business world: fraud.
Fraud has been around for as long as we can remember, so you’d think organisations would have learned how to identify and prevent it by now. Unfortunately, that’s not the case. In fact, the pendulum seems to be swinging the other way, with the scales tipping further in the favour of fraudsters. While organisations have improved upon their ability to fight fraud, financial criminals have honed their skills and become more adept at duping companies and their employees, to the point where fraud is actually seeing a resurgence.
The ongoing pandemic hasn’t helped the situation. In fact, it’s provided scammers with more opportunities to launch attacks. Economic crime reached its highest level in the past 24 months, according to PwC’s Global Economic Crime Survey 2020: UK Findings. More than half (56 percent) of UK businesses surveyed in the report said they were impacted by fraud, corruption or other economic crime. This 2020 figure is the highest since the inception of the Global Economic Crime Survey. The UK number is also higher than the global average of 47 percent of companies reporting they experienced fraud in the past 24 months. Even this global number is the second highest reported level of fraudulent incidents in the past 20 years.
If we look at the most common types of fraud, cybercrime makes the list of the top four, and the global survey discovered a 34 percent increase in this type of fraud. Business email compromise (BEC) attacks in particular are on the rise, with invoice and payment fraud being the most common type of BEC attack.
While no company wants to see its name on the victim list, a quick search in the news shows even Goliath-sized companies can still fall prey to fraud scams. Take Amazon, for instance: It’s considered the standard for how to run and operate a successful business. Yet, just last year, news surfaced that the company was the victim of invoice fraud amounting to $19 million. Google and Facebook were also the victims of fraud when both companies processed forged invoices sent as part of a phishing email scam.
Any company—big or small—is vulnerable, which means every organisation needs to ramp up their defense. This is especially true for financial institutions which must comply with complex and ever-changing regulations. Add in the ongoing customer life-cycle transformation and protecting the business from fraudulent activity seems more challenging than ever.
Fortunately, there are steps that organisations can take to fight back against fraud and meet “know your customer” (KYC) requirements. Fraud detection and prevention has, for the longest time, been based on a three-pronged approach comprised of people, processes and technology. While all three elements are still essential, the increased complexity of fraud scams demands a greater reliance on the technology portion. People still play an important role, but it’s become increasingly difficult for the human eye to spot fraud given how sophisticated scams have become. Processes aren’t going to disappear either, but their key role is to connect people and technology in a way that makes them stronger together than when used alone.
Unlike people, technology has evolved—so it can do a better job of keeping up with the advances in fraudulent activity. New techniques are available, making it the best choice to lead the charge. But where do you start?
Accounts Payable: Your Best Defense Against Fraud
Many historic wars have famous fronts associated with them—the Eastern front in WWI and the European front in WWII, for example. When it comes to the war against fraud, accounts payable (AP) is an extremely active combat zone. Ardent Partners’ recent State of ePayables Market Research Report does an excellent job of summarising why AP plays a crucial role in fraud detection and prevention: “Accounts Payable sits in the middle of an enterprise’s financial activity and is ideally suited to identify and flag potential instances of invoices and/or payment fraud.”
The data backs up this statement. The report goes on to cite that 87 percent of AP teams support fraud prevention and compliance activities. And it’s a good thing AP soldiers are actively fighting fraud, as there’s been an increase in BEC attacks targeting employees within finance departments.
But AP staff don’t stand much of a chance against more complex fraud schemes if they stick with the same approach they’ve been using. They need more power. Intelligent AP automation is a modern weapon financial organizations can use to keep fraud at bay. In fact, the Ardent report discusses how AP automation transforms accounts payable, eliminating the errors associated with manual work and enabling AP staff to “better support compliance and risk management teams in enforcing policies, identifying potential red flags and escalating issues internally.” AP automation “reduces the risk of fraud and increases compliance by employing standards for handling expectations and workflows.”
Many organisations are beginning to see the benefit of investing in technologies and other resources to fight fraud, with 40 percent of respondents to PwC’s global survey stating they plan to increase their spend on fraud prevention over the next two years. The report also notes this is a smart choice since “there is a clear link between fraud prevention investments made upfront and reduced costs when a fraud strikes.” Additionally, companies using tools such as artificial intelligence are seeing value in the battle against fraud when the tools are properly implemented. For organisations considering an AP automation solution, it’s important to understand what makes this weapon valuable and how it can help fight fraud.
AP Automation Arsenal: A Weapon of Mass Destruction to Fight Fraud
A truly intelligent AP automation solution is comprised of multiple technologies which, when combined, create a strong defense against fraudulent activity. Let’s start with automated invoice processing, which saves time and eliminates errors. Multi-channel invoice capture allows suppliers to send invoices in their preferred format. Artificial intelligence technology captures and analyses invoices coming in, determines the document layout, and extracts the required information. An electronic archive of invoices (and other financial documents) is available thanks to workflow and imaging solutions. Process orchestration automatically sends exceptions to human AP employees for review and approval.
The technology also creates a document ownership trail, tracking the actions and handoffs between human and digital workers. Some intelligent AP automation solutions from providers have intelligence built in. They can even automatically identify the items to extract from an invoice and whether pay slips have been altered—an important weapon for fraud detection. Intelligent automation can also be applied to onboarding suppliers, with automatic validation of key information like addresses and tax data.
So how, exactly, does all of this help in the fight against fraud? AP teams are less likely to approve fraudulent invoices or make duplicate payments since automation eliminates the errors that can occur with manual invoice processing. Automation technology can even flag potentially fake invoices sent by unknown vendors. AP staff can establish various approval and exception workflows in the automation system to trigger a review if an invoice comes in above a given dollar amount. The same can be done for invoices from new vendors or when the invoice amount doesn’t match the associated purchase order (PO). Also, regarding POs, automation can verify whether invoices match up with the goods ordered or received.
Advanced analytics can identify changes in vendor behaviours which may be a cause for concern, and third-party sources can be integrated in order to verify the validity and authenticity of new suppliers and vendors. Since AP staff no longer have to deal with manual invoice processing, they can spend more time investigating potentially suspicious activity. AP automation even provides audit trails staff can use to research possible fraud.
The battle against fraud continues to morph as scammers become more mature. AP teams are right there on the front lines, serving as your best defense against financial crimes. Don’t send them into combat unarmed. With intelligent AP automation technology, AP staff can work (and fight) like tomorrow, today.