Invoice Fraud and How Accountancy Firms can Combat it

Hi everyone,

Accountancy firms usually think they’ve got a handle on fake invoices, but this might be a good time to think again.

To set some context, here’s what the Financial Times reported yesterday, UK engineering group Arup lost HK$200mn ($25mn) in a deepfake scam where fraudsters digitally cloned a senior manager during a video conference to authorize financial transfers.

Invoice fraud – largely seen as something that only happens to other businesses – is way closer to home than you think. Let’s talk about it today.

As someone who has been around the accounting block for a long time now, let me tell you the rise of invoice fraud is no joke. UK Finance data revealed that in 2022 alone, over £1.2 billion was stolen from UK businesses through invoice fraud!

However staggering that figure is, a lot of accounting firms are still in the dark about just how serious this issue is. So, how can accounting firms become more vigilant about invoice fraud?

First step is to identify how scamsters go about these frauds:

The most common one is impersonating a real supplier. These imposters send fake invoices or tamper with real ones, inflating charges to steal your hard-earned cash. But that's just the tip of the iceberg.

Similarly, duped payments complicate invoice management for accountants. OpenEnvoy reveals that nearly 10% of all invoices are duplicates, potentially costing firms millions.

Next, like fake invoices, watch out for recurring invoices. This is basically a subscription trap. Companies forget to cancel unused subscriptions and keep getting billed. As the subscription economy booms, an awful lot can slip through the cracks.

Lastly, be on guard against phishing and social engineering tricks. Egress Email Security Risk Report reveals nearly 90% of businesses faced phishing attacks in 2023. Deceptive emails pretending to be from vendors or clients can trick employees into approving fake invoices.

Now, what counter mechanism can accountancy firms employ in dealing and potentially avoiding invoice fraud?

The first step is choosing reliable vendors. This involves scrutinizing their reputation, credentials, and financial stability. Look into their past performance, client testimonials, and industry affiliations to gauge their credibility, this can help mitigate any potential acts of fraudulence.

Next, ditch those outdated questionnaires and use modern vendor management tools to secure your payment process. Use multi-factor authentication for accessing sensitive payment data and encryption of financial transactions to proactively identify and address risks. In fact, SecureAuth and Ponemon Institute found that MFA reduced account takeovers by 76% compared to password-only methods.

Deloitte research shows that just 28% of businesses have formal invoice verification processes. So remember, if scammers can use tech, so can you. Invest in AI-powered software that can detect fraud, automate tasks, and secure your entire invoice payment cycle. This way, your team can rest easy knowing their payments are going to the right place.

Lastly, while all this tech talk is great, don’t forget your employees are the frontline defenders against invoice fraud. A KPMG survey reveals 68% of organizations believe employee training is the best defence against fraud.

So, train your employees to identify common and evolving invoice fraud tactics. For example, employees need to be wary of urgent payment requests, a top tactic in invoice fraud involved in over 35% of reported cases, according to the Federal Trade Commission.

So, that’s the in and out of Invoice fraud – a persistent threat that can be dealt with with a proactive approach and proper safeguards.

Let's keep the conversation going and make it more useful for the accounting community. Have you and your team had any close calls with invoice fraud? Share your thoughts and help spread awareness in turning the tide against fraud!

Contact us today to learn how Samera Global can support your firm's growth and efficiency!

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Until next time,

Arun

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