What a former British MP can teach us about payments fraud | Medius
Businesses and organizations globally are experiencing increasing payment frauds. One case that hit the headlines in the UK was that of former Labour MP, Jared O’Mara, who has been accused of totalling £52,000 ($63,521.12) in invoice fraud.
How does a former public servant end up committing invoice fraud?
It’s an unusual case, a former public servant falling into debt at the hands of his drug dealers - but doesn’t take away the fact that those organizations who have inadequate vetting processes can facilitate a loophole for criminals to set up illegitimate vendors. This can lead to invoice fraud, and significant losses to a business.
How common is invoice fraud?
Setting up illegitimate vendors is a common way to commit invoice fraud, simply because it’s easy for criminals to do, and because checks are rarely carried out to determine the legitimacy of invoice inbounds. Another key take-away from this case is that fraudsters don’t necessarily operate from outside a business. Nor do they necessarily target unfamiliar organizations.
In fact, once the inside trader sets up the fake supplier in the business system, they can submit invoices that are low cost enough to be approved quickly, without triggering the need for additional approval checks. Any business or organization with known “prick-points”, or lacking in robust payment systems is potentially at a heightened risk of being defrauded by employees who understand workplace processes. This can also encourage employees to commit fraud on multiple occasions too.
To combat this, businesses can adopt AP automation solutions which enable them to apply invoice tools. Often powered by AI, these tools can flag irregular and unauthorized activity across the payments chain.
A recent global survey of senior finance executives found that the average UK organization catches an average of around 15 fraudulent cases a year. The data confirms that invoice fraud is one of the fastest growing crimes in the UK. What’s most concerning is that 20% of finance teams are unable to estimate what invoice fraud costs their business, with an average of £295,000 ($360,397.66) losses to UK business annually.
What can be done about invoice fraud?
However, the good news is that today, many organizations have access to smart technology, including digital invoice solutions which enable them to automate and centralize approval processes. To learn more about e-Invoicing, click here. This can not only enhance end-to-end transparency within the payments chain, with organizations able to see in real-time where money is flowing in and out, but can also flag any irregular and anomaly behavior through artificial intelligence. This technology helps mitigate the risk of fraud with real-time data and communication, and anomaly detection which both work in unison to reduce attacks.
Fraud shouldn’t be looked at through the prism of organizations that are unnecessarily paying out. If an MP can commit invoice fraud in the tens of thousands to fund an addictive habit, then it is safe to say that payments fraud has far-reaching negative effects that extend beyond the workplace - permeating the economy, and society as a whole.
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