Payment redirection scams are a serious threat to businesses of all sizes. These scams involve fraudsters impersonating trusted vendors and sending fake invoices that trick employees into making payments to fraudulent accounts.
Imagine receiving an invoice that appears to be from a regular supplier, but with slightly altered bank details. An unsuspecting team member might process the invoice without noticing the red flags, leading to a significant financial loss.
The deceptive tactics
Fraudsters constantly refine their tactics, using a variety
of methods to create an appearance of legitimacy. Some of these include:
- Vendor spoofing: Fraudsters can create fake invoices with logos and branding that closely resemble those of legitimate vendors. They might even use information obtained through data breaches to personalise invoices with real purchase order numbers or past order details.
- Urgency and pressing tactics: Fake invoices often contain urgent payment requests or reference fictitious deadlines to pressure employees into processing the payment quickly. This tactic can exploit the need to maintain good supplier relationships and avoid delays.
- Manipulating bank details: The most crucial element of the scam involves subtle changes to the bank account information listed on the invoice. These might be slight alterations in account numbers, routing numbers, or even typos strategically placed to go unnoticed.
Being on the end of financial scams can be devastating for businesses. The repercussions could affect the viability of your business, jeopardise cash flow and put a drag on confidence and trust, making it hard to recover.
Worryingly, a recent report from the Australian Competition and Consumer Commission (ACCC) indicated Australians lost more money to payment redirection scams in 2023 than in the previous two years despite a 28 per cent decrease in the total number of cases.
This indicates that the methods employed by fraudsters are growing increasingly sophisticated and challenging to detect, highlighting the urgent need to act to protect your business.
There are ways to combat payment invoice fraud and it is usually a multi-layered approach. Here are steps you can take to assist your accounts payable (AP) team in reducing the risk of invoice fraud:
1) Establish clear internal protocols for reviewing and approving invoices
This may involve having a two or three-person verification process for invoices above certain thresholds to make sure all transactions are valid. You should also limit access to your financial systems to authorised personnel and conduct regular audits to make sure they are still active. There is software that you can use to simplify this process, such as Clearway, that allow you to set up automated approval workflows and help you track every invoice across your business.
2) Use intelligent invoice approval technology
These technologies, such as Clearway, rely on machine learning and smart data capture to ensure all invoice data is captured and matched correctly with their corresponding purchase orders and delivery receipts before verifying payments. Every step of the process is scrutinised and authorised before an invoice is processed. This transparency is crucial for spotting fraud patterns and adhering to compliance standards.
3) Vendor management
Maintain a verified list of your vendor contact details in your financial system and keep it updated. All changes should be verified with the vendor directly and NOT through information provided in the invoice.
4) Educating your team
Employees play a crucial role in defending against invoice fraud. Make sure you empower them with the necessary knowledge to help them protect your business. Develop targeted training programs that address the specific types of scams prevalent in your industry to help your AP team better recognise and respond to suspicious behaviours. Encourage them to raise concerns about dodgy looking emails, invoices, or phone calls. Remember training is not a one-time event and you should always look at continuously improving your defences.
Invoice scams pose a significant threat to any business, but by adopting a layered defence strategy, you can significantly reduce your risk. Empower your AP team with the technology and knowledge they need to safeguard your business from financial losses and maintain trust with your vendor and clients.