Invoice fraud and what it means for your business

29 July, 2015

Managers and accounts teams are quite rightly more focused on running a business than verifying every detail of the many invoices they receive. This can leave them vulnerable to the growing problem of invoice fraud.

 

Invoice fraud essentially involves a criminal impersonating a supplier and deceiving a business into paying money due on genuine invoices to a fraudulent third party. Aside from the cost implications, the means of impersonation also pose a security risk. The required information is often – but not exclusively – gained by hacking into the business’ email or by the revelations of a dishonest employee.

 

The criminal will then pose as the supplier and make a formal direction to the relevant person at the business to transfer payment of invoices to a fraudulent account. This is usually made by email and may attach a formal letter impersonating the supplier’s letterhead, including an amended invoice. The sophistication of the forgery and deception will vary but in many cases busy managers simply do not have the time to check if the redirection is a legitimate request.

 

Often, you will not become aware of the fraud until chased for payment of the genuine invoice. At that point recovery of the funds from the fraudulent account is often difficult because they are likely to have been quickly transferred elsewhere, possibly abroad.

 

The key to prevention is to draw up identification procedures and ensure staff who pay supplier invoices know to check any changes to financial arrangements by two methods in case one has been hijacked by the fraudsters.

 

Should your business be a victim of fraud:

  • contact your bank and the beneficiary bank to attempt to stop the transaction;
  • call the police;
  • if the value is significant, seek legal advice about a freezing injunction;
  • contact your supplier to explain the reason for late payment – this may delay them from taking legal action while you investigate your options; and
  • investigate how the problem has arisen and how your policies could be changed to prevent a similar situation in the future.