Using technology to fight dirty money

Fraud is as old as commerce itself. You might think organizations have now figured out how to fight fraud and prevent it from harming their business and reputation. Unfortunately, the opposite seems to be happening. Just as business processes have become more sophisticated over time, so has fraud. In fact, fraudulent activity seems to be experiencing something of a renaissance, a kind of renaissance, thanks to the pandemic.

Cyberattacks in general have skyrocketed since the onset of COVID-19, and fraud has been no exception. According to the KPMG Fraud Survey 2021, 72% of Australian businesses reported that the risk of fraud and corruption had increased during the pandemic, and 85% did not expect the risk to decrease in 2021. During the Q3 2020, the median number of Business Email Compromise (BEC) attacks received per company is estimated to have increased by 15% compared to Q2. Of these attacks, those using billing or payment fraud increased by 155%, making them the most prevalent type of BEC attack.

Financial institutions, in particular, are on high alert when it comes to fraudulent activity. The threat of regulatory non-compliance weighs heavily on financial organizations, and with the customer lifecycle in the midst of transformation, it can seem harder than ever to protect the business.

Nobody wants to be a victim of fraud, but history has proven that even the biggest companies in the world are not immune to financial deception. Take Google and Facebook, for example. In 2019, the two companies were defrauded of over $100 million due to phishing emails containing fake invoices. The emails were sent to the Accounts Payable department, and although both companies had some security measures in place, the seemingly legitimate invoices were processed. Then there’s the story of American tech entrepreneur Mark Cuban, who had $82,000 stolen from his first company by an employee cashing fake checks at the bank. The lesson here is that any business is vulnerable to fraud when the right safeguards are not in place.

So what are the right measures? The key to preventing fraud and meeting Know Your Customer (KYC) requirements is the right mix of people, process and technology. But as fraud has become more sophisticated and the landscape is ever-changing, success requires organizations, especially AP teams, to place greater faith in the technological piece of the fraud detection puzzle. People will still play a role, but as scammers get harder to identify, it gets harder for humans to take them down. Processes also play a role in mitigating fraud, but they must be designed to unite people and technology.

Which brings us to the technology component of the fraud protection equation. Technology, like fraud, has become more advanced, so it can do things that even the best people and processes can’t. It’s the best defense against increasingly sophisticated fraudsters, and it’s the most resistant to human error, whether innocent or malicious.

Accounts Payable: The First Line of Defense

The best defense is a good offense, and the AP service is on the front line when it comes to identifying and preventing fraudulent activity. A recent market research report on the State of Electronic Payments from Ardent Partners sums up the role of AP well: “Accounts payable sits in the middle of a company’s financial activity and is ideally suited to identify and reporting potential instances of invoice and/or payment fraud. In fact, 87% of AP teams support fraud prevention and compliance activities.”

As fraud evolves and scammers become more sophisticated (and dangerous) in their tactics, AP staff need to modernize their approach. Intelligent endpoint automation is a smart investment for financial organizations looking to strengthen their defenses. Automation provides direct benefits to the people, processes, and technology responsible for stopping fraudulent activity.

The Ardent report specifically addresses the benefits of automation, stating, “As a byproduct of its own transformation, AP can better support compliance and risk management teams in enforcing policies, identifying potential red flags and escalation of internal problems”. Eliminating error-prone manual labor is at the heart of this transformation. An AP automation solution sets standards for exception and workflow management, reducing the risk of fraud and increasing compliance.

Australian businesses in particular are beginning to realize the importance of technology in preventing fraud, with 38% saying they use forensic data analytics or artificial intelligence to help detect fraud and corruption in the KPMG investigation. But how, exactly, does endpoint automation help stop fraud in its tracks?

AP Automation: Technology Leading the Charge Against Fraud

There are several smart endpoint automation technologies that work together to protect financial organizations from fraudulent activity:

  • Access Point Automation Solutions (APA) automate invoice processing, save time and reduce errors.
  • Process Orchestration Automatically routes exceptions for human review and approval and maintains a handover trail between human and digital workers.
  • Artificial intelligence determines the layout of the invoice and identifies the right information needed, regardless of format.
  • Multichannel invoice capture automates the process, regardless of how suppliers send invoices: XML, paper, PDF.
  • Workflow and Imaging Solutions provide an electronic archive of invoices and other financial documents.
  • Automated Supplier Onboarding validates addresses, tax data and other critical information.
  • Intelligence within the Kofax Solution Set can automatically identify what to extract from an invoice and whether payslips have been tampered with or altered in any way.

Properly armed with the right technology, AP teams can combat fraud in several ways:

  • Automation eliminates errors associated with manual invoice processing, which can lead to duplicate payments or fraudulent invoice approvals.
  • The automation can flag the submission of fake invoices from unknown vendors.
  • Reconciliation of purchase orders ensures that invoices exactly match the goods ordered or received.
  • Approval and exception workflows can be triggered automatically for invoices over a certain amount, from a new vendor, or if the amount does not match the purchase order.
  • Freed from manual invoice processing, AP staff can focus on exceptions and apply their knowledge to unusual changes in supplier behavior.
  • Advanced analytics allow the AP team to note trends in supplier behaviors and identify changes that may warrant investigation.
  • Audit trails provide the data needed to detect potentially fraudulent activity.
  • Verification from third-party sources helps prevent identity fraud among new suppliers and vendors during the onboarding process.

It’s the combination of people, process and technology that ultimately protects a company’s cash. As fraud has evolved and become harder for humans to identify, financial organizations need to rely more on technology. AP teams equipped with powerful and intelligent AP automation technology can do more than win a battle against fraud: they can win the war. From simple employee forgeries to complex cyber threats, intelligent automation is leading the charge against fraud and helping AP teams work like tomorrow, today.


Mike Malzacher, Sr. is product marketing manager at Kofax.

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