Greg Crowl | 11 November 2022
Although fraud is not a new phenomenon, organizations will need to be equipped to identify and prevent fraud.
Every organization’s primary aim is to be profitable – and no fault should be seen in that. But what they want to stray away is the dirty side of money. That would be the “F” word in the business world: fraud.
Although fraud is not a new phenomenon, organizations will need to be equipped to identify and prevent fraud. In fact, the pendulum seems to be swinging the other way, with the scales tipping further in the favor of fraudsters. Financial criminals have been sharpening their skills and cunningly preying on unsecured companies as well as their employees, although organizations have been improving their fraud defense.
The prolonged pandemic hasn’t helped the situation. In PwC’s Global Economic Crime and Fraud Survey 2020, 42 percent of Singapore-based organizations were have fallen victim to fraud over 24 months, of which 23 percent suffered a cumulative loss of more than US 50 million to fraud, higher than the global level at 13 percent. Singapore’s prominent positioning as the financial hub of Southeast Asia is likely a key driver of the growing reported economic crime rate.
The common type of frauds that are rising in ASEAN markets, among an array of violations, are asset misappropriations, misleading financial statements, and resume fraud. These frequent events of frauds are happening due to poor fraud awareness and minimal standards of digital literacy. Statistics from CyberSource showed that fraud cost Southeast Asia at least 1.6 percent of digital revenue, with Indonesia leading at 3.2 percent.
No company wants to be duped by fraudsters, but even trillion-dollar companies do falter. Amazon, the benchmark of running a successful business, was defrauded of US 19 million. Facebook and Google were also scammed of US 100 million by forged invoices sent through phishing email scams.
Whether it’s a small or medium enterprise (SME) or a multinational corporation (MNC), fraudsters are targeting them, which means defenses in an organization are required to be current. For instance, financial institutions have to comply with complex and ever-changing regulations set by the government. Add in the ongoing customer life-cycle transformation, and protecting the business from fraudulent activity seems more challenging than ever.
Fortunately, there are steps organizations 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
Accounts Payable (AP) staff relying on old tricks are defenseless against more complex fraud schemes. Intelligent AP automation is a modern weapon financial organization can use to keep fraud at bay. 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 organizations 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 organizations considering an AP automation solution, it’s important to understand what makes this weapon valuable and how it can help fight fraud.
Asia Pacific financial institutions are prepared to invest millions in fraud prevention according to a GBG report titled “Future-proofing Fraud Prevention in Digital Channels: APAC FI Study”. An estimated budget of US 83.3 million will be used by financial institutions to purchase the latest technology to tackle fraud till 2021. 57 percent of APAC financial institutions are claiming they’re working towards upgrading fraud prevention infrastructure while 50 percent have already made investments for digital onboarding fraud solutions, including Thailand and Indonesia with the biggest fraud budgets at US 95.4 million and US 88.9 million respectively.
AP Automation Arsenal: A WMD to Fight Fraud
A strong defense against fraudulent activity consists of multiple technologies that make an AP automation solution truly intelligent. To begin with, automated invoice processing allows time to be saved and eradicates human errors. Suppliers can send their invoices in the format of their choice through multi-channel invoice capture. Artificial intelligence technology captures and analyzes invoices coming in, determines the document layout, and extracts the required information. An electronic archive of invoices, including 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 detect items to extract from an invoice and whether pay slips have been manipulated—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.
With automation technology in place, AP teams will be aware of common human errors like invoice fraud or duplicate payments. Additionally, unfamiliar vendors sending fake invoices will be identified as a red flag based on the AP staff guidelines. If an invoice states payment above the agreed amount, the automation system will trip for a review. It’s similar for invoices from new vendors or when the invoice amount doesn’t match the associated purchase order (PO). Automation can also verify whether invoices match up with the goods ordered or received.
Advanced analytics can identify changes in vendor behaviors which may be a cause for concern, and third-party sources can be integrated to verify the validity and authenticity of new suppliers and vendors. With invoices being automated, AP staff have extra time to examine other scandalous events. Traces of possible fraud can also be detected by staff with audit trails.
The battle against fraud continues to morph as scammers become more mature. At the front lines are AP teams 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.