Phishing Phriday Episode #19 – Accounts Payable Fraud

In today’s digital landscape, businesses face numerous threats, one of which is accounts payable fraud. This type of fraud involves any internal or external attempt to misappropriate funds intended for vendors, suppliers, or other expenses. Whether through intercepting payments or creating conditions to steal funds, this form of fraud can significantly impact a business’s financial health.

What is Accounts Payable Fraud?

Accounts payable fraud encompasses various tactics used to divert money meant for legitimate business expenses. This can include business email compromise (BEC), where fraudsters impersonate vendors or employees to redirect payments. Another common tactic is billing schemes, which involve creating fake invoices or manipulating legitimate ones to funnel money into unauthorized accounts.

Types of Accounts Payable Fraud

1. Billing Schemes: Fraudsters send fake invoices or impersonate vendors, resulting in duplicate payments where the excess amount is diverted to the fraudster’s account.
2. Check Fraud: Involves altering the amount on a check or writing checks for personal expenses from a business account. Surprisingly, 75% of businesses have fallen victim to this type of fraud.
3. Kickback Schemes: Vendors or suppliers offer financial rewards to employees to influence procurement decisions, which, although may seem benign, constitutes a form of fraud.

Internal vs. External Threats

A common misconception is that cyber risks only come from external sources. However, internal threats are equally dangerous. For instance, an employee manipulated invoices over 14 months, resulting in over $600,000 in losses. This example highlights the importance of monitoring both internal and external transactions to mitigate fraud risks.

Real-Life Example

Consider a case where an employee received a phishing email that appeared to be from the CEO. The email requested an accounts receivable listing, which the employee, wanting to be helpful, promptly sent. This mistake provided the fraudsters with a target list for future scams, emphasizing the need for vigilance and verification.

Preventive Measures

Preventing accounts payable fraud starts with awareness and implementing robust verification processes. Here are some key strategies:

1. Awareness: Regularly educate employees about the risks and signs of fraud.
2. Verification Processes: Always verify the identity of individuals requesting changes to financial details. Use trusted methods to confirm requests, such as calling known contacts directly rather than using contact details provided in suspicious emails.
3. Multiple Verification Methods: For significant changes, use multiple forms of communication to confirm requests.

Practical Tips for Businesses

1. Know Your Clients and Suppliers: Establish strong relationships and maintain up-to-date records.
2. Use Secure Communication: For sensitive transactions, prefer secure methods over email.
3. Pick Up the Phone: When in doubt, confirm requests by calling known contacts using trusted phone numbers.

Conclusion

Accounts payable fraud is a significant threat that requires a proactive approach. By raising awareness, implementing verification processes, and staying vigilant, businesses can protect themselves from potential losses. It’s crucial to remember that fraud can come from both internal and external sources, and comprehensive strategies are needed to mitigate these risks.

Stay informed, stay secure, and always verify before you trust.