Is automation a solution to vendor fraud?

A survey conducted by Treasury & Risk revealed that 56% of companies in the US were victims of vendor fraud in 2022, and most companies that were a victim of fraud attempts were targeted more than once. The research suggests  12% of all US companies were targeted more than 10 times and 5% more than 15 times. According to the report, these record-breaking numbers can be linked to changes in the way fraudsters operate, as they become more organised and sophisticated.  

What is vendor fraud?

Vendor fraud, also known as supplier fraud or procurement fraud, refers to deceptive or fraudulent activities conducted by a vendor or supplier in a business transaction. This type of fraud typically involves a vendor deliberately engaging in unethical or illegal practices to gain an unfair advantage or financial benefit at the expense of the company they are doing business with.

Overbilling: Vendors may submit inflated invoices for goods or services, charging more than what was originally agreed upon.

Ghost vendors: Some fraudsters create fake vendor accounts to channel money from a company through fictitious transactions.

Substandard goods or services: Vendors may provide subpar quality products or services compared to what was promised or agreed upon.

Kickbacks and bribes: Vendors may offer bribes or kickbacks to employees within the buying organisation in exchange for preferential treatment or lucrative contracts.

Collusion: Vendor employees or insiders within the buying company may collude to manipulate procurement processes, ensuring that the vendor secures contracts through unfair means.

Non-delivery of goods: Vendors may accept payment for goods or services but fail to deliver as promised, leaving the buying company without what they paid for.

Double billing: Some vendors might submit duplicate invoices for the same goods or services, effectively overcharging the buying company.

Bid rigging: In competitive bidding processes, vendors might collude to ensure one of them secures the contract by submitting inflated or fraudulent bids, leading to higher costs for the buyer.

Can automation help to prevent vendor fraud?

Autonomous commerce solutions provider JAGGAER and fraud prevention platform Trustpair are currently collaborating on automated systems to help protect against vendor fraud. 

“The integration with Trustpair enables JAGGAER customers to add an additional layer of protection against a risk that has been on the rise around the world. Organisations are vulnerable when new supplier bank accounts are added or modifications are made to existing accounts, and the fraudsters are getting more sophisticated in exploiting such changes,” said Dawn Andre, Chief Product Officer, JAGGAER. “By automating fraud detection with Trustpair, CFOs at JAGGAER customer organisations can sleep easier in the knowledge that they can pay their suppliers on time without the risk of being the victims of payment fraud,” she added.

“We’re delighted to work with JAGGAER, a global leader in procurement and supplier management technology, and to give customers peace of mind that they are paying the right vendor every time. This native integration of Trustpair with JAGGAER enables procurement and finance teams to confidently mitigate vendor payment fraud within their current procure-to-pay process,” said Baptiste Collot, CEO and co-founder, Trustpair.

“Fraud has become incredibly sophisticated and complex and is a big concern for organisations everywhere. Our solution gives a clear view of organisations’ fraud risk and eliminates fallible manual account validations and controls that are no match for the savvy fraudsters organisations are up against,” Collot added.

“By automating account validations from supplier onboarding through to payment, Trustpair extends JAGGAER’s Autonomous Commerce offering, which already deploys various AI-based solutions to protect against threats in many areas of supplier and supply chain risk,” Andre said.

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Other magazines that may be of interest - Supply Chain Magazine | Sustainability Magazine

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