Invoice Fraud
Salih Ahmed ISLAM
Internal Audit Expert CIA | MBA | GRCP | Consultant | Trainer | Author
The “fake business”, which is frequently mentioned in invoice frauds, is considered to be businesses created by the employee for the purpose of fraud. These businesses should not be considered as real businesses in the commercial sense. These institutions mostly do not have a physical structure and do not produce goods or services. They are businesses that are usually created on paper and whose sole purpose is to commit fraud. The 3 step process listed below are usually followed through the establishment of such fake businesses:
- A business is established,
- A postal address is created,
- A bank account is opened.
The fake business that is tried to be explained at this process should not be perceived completely as a ghost enterprise. These are businesses established according to the legal regulations of each country. Therefore, in principal, they exist legally. The concept of fake business comes from the content of it. On the other hand, an employee of a company can also be a part of a structure that does not actually exist, but is shown as if it is exist with its goods and services.
In some cases, employees imitate the names of the fake companies they have established to the names of the suppliers that already sell goods or services to the company they work. At the same time, the formats of the documents issued by the fake company are also imitated to the documents of the original supplier. Thus, since it gives a known business image, the operation is carried out more comfortably and without attracting attention. Since the addresses are different, there is no problem in payments.
In many fraudulent business incidents, it is widely seen that the emphasis is on the purchase of services rather than the purchase of goods. The reason for this, it is difficult to make a physical delivery as a result of purchase of goods, and the fraud is more easily maintained because it is not necessary in the purchase of services. In fraudulent invoices due to the purchase of goods, there is a possibility that the action may be revealed after the inventory review, as the goods must be delivered physically. However, it is more difficult to reveal if the purchase is service rather than goods. Therefore, fraudulent invoicing acts, for example, under the name of "Consulting Services" are common.
The easy point in the fraudulent process with a fake company is the issuance of false invoices. The difficult part is that these invoices coming to the company are approved and paid. Especially the approval stage of the relevant invoice is the bottleneck of the process. The following ways are frequently tried to ensure that fake invoices are approved:
- The fraudster approves the invoice,
- Fake supporting documentation is created,
- Lack of internal control,
- Cooperation with the approved party.
Head of Cash Management and Treasury Operations at Hewlett-Packard
3 年Great opinions and ways to show fraud Salih Ahmed ISLAM, I just want to add that, another tactic that may be deployed involves social engineering.?Fraudsters may contact company staff in order to obtain further information or to push the case for payment.?They know the times when you’re likely to be busy or less alert, for example, Friday afternoons are a busy time for companies involved in property sales, so that’s when they’re likely to ring. For other businesses they understand that you may have a reduced number of staff or less experienced, temporary staff during the summer months.