Sometimes it seems that fraud in Purchase to Pay must be impossible to prevent. Almost every week at PPN we report on fraudulent activity across finance, procurement, AP and related departments – each one often bearing a very similar traits to the last.
On the one hand that makes for depressing reading, on the other, you could say that it offers hope. Fraudsters are often opportunistic and in most cases their activity follows a pattern. And every activity that follows a pattern leaves a trail of clues. All an organisation has to do is look out for them, notice them and know how to act when those clues start to add up.
Of course the key is in the word “all”. Too often organisations fail to thoroughly investigate their processes to check for inherent risk or weakness – sometimes relying too heavily on outdated technology, or a system that they’ve inherited, to do the work for them. In a recent conversation with a public sector organisation, a newly appointed finance manager discovered that no-one knew how the processes were supposed to work because the person who was in charge had recently retired and no one knew what they didn’t know until he’d left.
It doesn’t take a huge leap of the imagination to consider how easy it would be for an unscrupulous person to take advantage of a situation where they were the sole custodian of information.
And it's this excess of trust that allows fraudulent activity to thrive. Unfortunately there’s not a lot we can do about that. It's natural to trust those we work alongside - particularly if they fit the bill for those most often found guilty of the P2P fraud - an individual in a position of authority, who’s been with the organisation for more than 4 years.
So if we can’t help trusting people, it makes sense to use automation to do the checks on our behalf and set up processes that will help close down any loopholes. While this is not going to make someone a better person, it just might stop them from carrying out their fraudulent plans in your organisation.
Unfortunately there will never be an anti-fraud tool kit you can simply deploy – every organisation is different and as technology changes – so does the fraudsters capabilities. However, there are a few things you can do to minimise the risk. Things to look out for:
• Invoices from various suppliers on similar stationary
• Suppliers with incorrect VAT numbers
• Transactions which are out of the ordinary – ie late at night
• Large number of invoices (esp to a particular supplier) just beneath the approvals threshold
• Few, or unclear reasons for a particular service
• Suppliers with PO Box addresses or home addresses
• Above average payments to a supplier
• An increase in duplicate payments
• Excessive amounts of rounded up, or down invoice amounts
• Erratic employee behaviour – always in early or late
• Sudden, or unexplained employee departure
• Upgrade in lifestyle – car, house, holidays, experiences
• Unusually close relationship with a supplier
• Evasive/indignant behavior when challenged to explain activity