Basware: How to Combat Rising AP Fraud

Accounts Payable (AP) fraud is rising sharply, becoming more frequent and sophisticated in the procurement landscape.

Global organisations are facing increased challenges to prevent financial losses and ensure compliance.

Basware, a leader in AP automation and e-procurement solutions, sheds light on these developments in its report The Rise in AP Fraud – Frequency, Sophistication and Impact. It highlights how businesses are struggling with growing fraud risks, particularly as evolving tactics exploit gaps in outdated systems and procurement processes.

The report reveals that 68% of organisations encountered at least one fraud attempt in 2024, with 19% experiencing multiple incidents. A minority (32%) claimed no awareness of fraud attempts but undetected incidents may still exist. Alarmingly, 62% of respondents confirm fraud attempts worsened last year, reflecting an urgent need for more robust defences in procurement and AP teams.

Generative AI and its role in fraudulent activity

One major driver behind the surge in AP fraud is the misuse of Generative AI procurement processes.

The report identifies this as a leading factor, with 62% of organisations citing AI as enabling fraudsters to create convincing materials. These tools can generate highly realistic documents, emails or even voice impersonations, making it easier to deceive AP teams.

Fraudulent communications increasingly mimic legitimate suppliers or executives, blurring the lines between genuine and fraudulent transactions.

This technology, while widely accessible, raises significant concerns for AP departments already stretched thin. Distinguishing authentic interactions from fraudulent ones becomes an uphill battle as fraud tactics grow in both sophistication and scale.

Operational gaps amplify fraud risks

Beyond AI, the report points to a lack of AP automation and fragmented systems as key vulnerabilities in procurement and supply chain management.

For large organisations, manual processes are inefficient and prone to human error. Around 28% of respondents cite the absence of automation as a critical factor. Without real-time monitoring, unusual patterns often remain undetected for weeks, leading to financial losses and strained supplier relationships.

Overburdened teams, reliant on outdated methods, are left struggling to juggle invoice approvals and track payments effectively.

Additionally, organisations are grappling with higher transaction volumes and larger supplier bases. Nearly 30% of respondents say increased transaction complexity has heightened fraud risks, while 25% cite supplier expansion as another challenge. These pressures make it difficult for AP teams to maintain the accuracy and consistency needed to prevent errors.

Remote working trends exacerbate these issues as one-quartre of respondents blame decentralised operations for enabling fraud, as the lack of physical oversight and reliance on digital processes leave organisations exposed.

According to the report, fraudsters can exploit these gaps by submitting falsified invoices or approving unauthorised payments, often undetected due to weak monitoring.

Types of AP fraud and contributing factors

AP fraud manifests in various forms, including internal fraud by employees, external manipulation such as invoice cloning and collaborative fraud involving collusion between employees and third parties in the supply chain.

Even non-malicious errors like duplicate payments can lead to significant losses. Weak controls, siloed processes and paper-based systems further complicate efforts to detect and address these risks.

Respondents highlighted several challenges in fraud prevention:

• Adapting to evolving tactics (34%): Fraud techniques grow more complex, leveraging AI and phishing to bypass detection.
• Handling high vendor query volumes (29%): AP teams, overwhelmed by communications, may miss red flags.
• Fragmented processes (27%): Siloed systems create blind spots, making it harder to spot irregularities.
• Limited resources and staffing (24%): Understaffed teams prioritise speed over thorough reviews, increasing exposure to fraud.
• Reliance on paper-based processes (24%): Manual methods hinder accurate invoice verification and reconciliation.

These findings show a pressing need for digital solutions and streamlined processes to tackle vulnerabilities in AP operations.

Strengthening fraud prevention strategies

The report also explores how organisations are addressing these challenges in their procurement and supply chain operations.

Most respondents rely on their AP teams to manage fraud prevention alongside regular duties. Only 10% have dedicated fraud prevention teams and just 2% use external consultants or vendors. While in-house efforts are common, external expertise can provide advanced tools and strategies, supplementing internal defences.

To safeguard against AP fraud, the report recommends:

• Embracing automation and AI-powered detection: Advanced platforms like Basware's automate processes, identify anomalies and reduce human error.
• Building cross-functional fraud prevention teams: Collaboration between departments ensures better oversight and accountability.
• Promoting vigilance and education: Ongoing training helps employees spot fraudulent tactics and strengthen internal controls.
• Leveraging external expertise: Third-party providers offer specialist knowledge and tools to address complex fraud scenarios.

The report makes it clear organisations must act decisively to stay ahead of increasingly sophisticated fraud tactics. By investing in digital tools, fostering collaboration and prioritising employee training, AP teams can reduce risks and improve operational resilience.

As Basware emphasises, automation is no longer a luxury but a necessity in combating AP fraud.

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