In 2021, invoice scams cost companies over $2.4 billion. This shows how big a problem invoice fraud is today. It's when scammers trick companies into paying them money they don't owe. This can hurt a company's finances, damage relationships with suppliers, and harm its reputation.
Businesses need to fight back against this threat. They must protect their money and keep their reputation strong.
Companies are using new tools to fight fraud. They are using software to help with accounts payable. This is because scammers are getting smarter, using tricks to get into company emails and steal money.
Invoice fraud is when someone sends fake bills to a company. They might say a vendor's contact or payment details have changed. This trick uses trust and established processes in an organization's accounts payable system.
These scams can be simple, like changing amounts on real invoices. Or they can be complex, with completely made-up invoices or fake vendors.
Invoice fraud, also known as mandate fraud, happens when a scammer pretends to be a supplier. They give new payment details. This can cause big financial losses for the business.
A Lithuanian man and his team scammed Google and Facebook out of $122 million. They used phishing and invoice fraud from 2013 to 2015.
In 2018, Save The Children lost about $1 million to fake invoices. These fake invoices, fraudulent billing, payment diversion, and vendor impersonation schemes can hurt companies of all sizes.
Invoice fraud is a common scam used by cybercriminals against businesses. They pretend to be real suppliers or vendors. They use tricks to get employees to pay money to fake accounts. Knowing how invoice fraud works helps businesses stay safe from these scams.
In impersonation scams, fraudsters pretend to be legitimate vendors or suppliers and send fabricated invoices to businesses. They often research their target to make their fake invoices as convincing as possible. This includes replicating the vendor's logo, formatting, and communication style.
Businesses are tricked into believing these invoices are genuine and unknowingly transfer payments to the fraudsters' bank accounts instead of the real suppliers. These scams exploit trust and often target companies with high invoice volumes, where individual transactions may not be closely scrutinized.
Email compromise involves hackers gaining unauthorized access to email accounts, often through phishing attacks or weak security measures. Once inside the system, they observe correspondence between a company and its vendors. Using this information, the fraudsters craft fraudulent invoices, mimicking real communication patterns and transaction details.
They update the payment instructions to direct funds into their own accounts. Because these emails appear legitimate, employees are often unaware of the fraud until after the payment has been made.
Phishing attacks aim to deceive employees into disclosing sensitive information, such as login credentials or financial system access. Fraudsters send emails that appear to come from trusted sources, urging recipients to click on malicious links or download harmful attachments.
Once the attackers gain access, they can approve fraudulent invoices or divert payments. These scams are highly effective because they rely on social engineering tactics that exploit human error and urgency.
In duplicate or inflated invoice scams, fraudsters submit fake invoices for goods or services that may appear legitimate but have already been paid. Alternatively, they inflate the amounts on invoices to siphon off extra funds.
These scams are particularly effective in organizations that lack strict oversight or do not have automated systems to detect duplicate payments. Fraudsters rely on the assumption that busy accounts payable teams won’t notice the discrepancies.
In these scams, fraudsters inform businesses of a supposed change in the payment details for a legitimate supplier. This notification is often sent via email or a phone call, appearing to come from the supplier. The message typically includes new bank account details, which belong to the scammer.
Without proper verification, businesses unknowingly redirect payments meant for their supplier to the fraudster’s account. This method often targets companies with long-term vendor relationships, making the request seem routine and credible.
Fraudsters sometimes establish entirely fake companies and issue invoices for goods or services that were never provided. These invoices are sent to businesses with weak vendor verification processes, relying on the assumption that the organization will pay without questioning the legitimacy of the supplier.
These fake companies often disappear once payments are received, leaving no trace for recovery. This type of scam thrives on organizations that do not thoroughly vet new vendors or cross-check the legitimacy of services rendered.
Invoice fraud is a big problem for businesses, causing a lot of financial loss and disruption. To keep your business safe, you need strong internal controls and verification steps. When you are proactive, you can lower the chance of falling into these scams and keep your finances healthy.
Verify any changes in payment instructions or new invoice requests and contact suppliers directly through trusted communication channels. Avoid relying solely on email for confirmation, as this is a common target for fraudsters. Instead, use phone calls or in-person visits to validate the details.
Cross-checking payment information with suppliers helps prevent funds from being diverted to fraudulent accounts and ensures that every payment is legitimate.
Establishing multiple layers of approval for high-value transactions or changes in vendor details is a strong defense against fraud. Require dual authorization from senior personnel for such changes, ensuring at least two sets of eyes review the request.
This process creates accountability and reduces the likelihood of fraudulent invoices slipping through undetected, particularly in fast-paced or high-volume financial environments.
Conducting routine financial audits is critical for spotting inconsistencies, duplicate payments, or suspicious activities. Audits provide an opportunity to review past transactions in detail and identify red flags that might have been overlooked.
Regular checks also encourage employees to follow established protocols, knowing that financial activities are closely monitored, and deter potential internal fraud attempts.
Investing in anti-fraud software can significantly enhance your ability to detect and prevent fraudulent invoices. These tools can automatically flag duplicate payments, identify inconsistencies, and monitor payment activity for unusual patterns.
Many solutions integrate seamlessly with accounting systems, providing real-time alerts and reducing the reliance on manual processes that are prone to human error.
Employee training is one of the most effective ways to combat invoice fraud. Educate your team on recognizing phishing attempts, fake invoices, and other common scams. Regular workshops or seminars can keep staff updated on the latest fraud tactics and reinforce best practices.
Empowered employees are less likely to fall victim to scams and more likely to identify suspicious activity before it becomes a problem.
If you think you got a fake invoice, act fast to avoid big financial losses. Here's how to report it and keep your business safe:
If you suspect an invoice is fraudulent, the first step is to report it to your employer or finance department. Escalate the issue to your manager, accounts payable team, or any other relevant personnel within your organization.
Ensure you provide all relevant details, such as a copy of the invoice, related emails, and any correspondence that might help establish the fraud. Prompt internal reporting ensures the issue is addressed swiftly and prevents further losses.
Contact the legitimate supplier or vendor directly using official contact details, not those provided in the suspicious communication. Confirm whether the invoice was issued by them and verify payment instructions.
If fraud is confirmed, inform the supplier immediately so they can take necessary steps, such as alerting other clients or tightening their security measures to prevent future incidents.
If a payment has been made, notify your bank as soon as possible. Banks often have fraud departments that can freeze transactions or potentially recover funds if action is taken quickly.
Provide them with all the evidence related to the fraudulent activity, including copies of the invoice and any relevant emails or documentation.
File a report with your local police department to document the fraud formally. Include all relevant evidence, such as the fake invoice, emails, and any correspondence. In addition, report the incident to national fraud agencies where applicable.
For example, in the United States, you can report to the Federal Trade Commission (FTC) or the FBI’s Internet Crime Complaint Center (IC3). In the United Kingdom, Action Fraud handles such cases, and in Australia, you can contact Scamwatch or the Australian Cyber Security Centre (ACSC). These agencies often provide resources and support for fraud victims.
If the fraud involves phishing or email hacking, report the incident to your country’s cybercrime unit. Provide technical details, such as email headers, IP addresses, and any suspicious links or attachments. Cybercrime units are equipped to investigate these specific types of fraud and can help identify and apprehend the perpetrators.
Notify industry groups or professional associations about the fraud to warn other businesses. Sharing details about the scam, such as the methods used and the fake invoice, helps others recognize and avoid similar threats. This collaborative approach strengthens overall industry resilience against fraud.
Certain regions or organizations provide dedicated online platforms for reporting scams. For example, businesses in North America can report to the BBB Scam Tracker, while the UK has the National Cyber Security Centre (NCSC). These platforms collect information on fraud trends and provide guidance for victims, helping to combat fraudulent activity on a broader scale.
After reporting the incident, keep track of the progress with the relevant authorities, your bank, or other involved parties. Follow up periodically to ensure the investigation is moving forward.
Also, review your organization’s internal processes to identify any vulnerabilities that allowed the fraud to occur. Use the incident as an opportunity to implement stronger security measures and reduce the risk of future scams.
Recently, we, at DepositFix, encountered a shocking case of invoice fraud involving a fabricated email thread. Here's a simplified version of how the scam played out:
At DepositFix, we understand how sophisticated invoice fraud can be, and we’re committed to supporting businesses in implementing security measures to reduce these risks. Some steps we recommend include:
Let’s talk about how you can protect your business against invoice fraud. If you'd like to learn more, reach out for a quick consultation.
Invoice fraud is a big threat to all kinds of businesses. You should be able to know how to spot fraud, how to keep your systems safe, and how to protect your money. These steps help keep your business safe and build trust with your vendors.
With more advanced cyber-attacks and the use of third-party vendors, new risks have appeared. Weak security, old software, and unsecured emails make it easier for scammers. Also, insider help can lead to more fraud.
To keep your business safe, check any suspicious invoices and have strong approval steps. Also, conduct regular audits and use anti-fraud tools. Training your team to spot phishing scams can prevent big losses.
Discover the hidden automation potential in your payment, billing and invoicing workflows. Talk to our experts for a free assessment!
%2C%20Color%3DNegative.svg)
