How to combat invoice fraud

Historically, many finance departments approached security with a reactive mindset, dealing with suspicious payments only once fraud had been committed. However, these days, once the funds have been transferred, being able to recover them is next to impossible. To be able to safeguard your business’s revenue against invoice fraud, you’ll need to shift from a reactive stance to a proactive approach, working to prevent invoice fraud as much as possible. 

When we look at modern-day invoice fraud, we can see that it has moved way beyond simple phishing emails. AI and sophisticated network intrusion are being used by criminal networks to target businesses all around the world, and it has become increasingly important to protect your business by steering away from outdated reactive processes to a more robust and proactive strategy. 

Here, we’ll discuss everything you need to know about invoice fraud, how to detect it and how best to mitigate it. 

Implementing Invoice Fraud Detection by Knowing These 3 Advanced Threats for Businesses

It is crucial to know how attackers are able to bypass current security measures so that you will be able to build a better system that protects your business. It comes as no surprise that cybercriminals have evolved their tactics. Let’s discuss these in more detail below: 

1. Impersonation via AI Voice Cloning

The first thing to watch out for is voice cloning and impersonation via AI. Financial criminals are now able to replicate specific accents and mannerisms with so much detail, making it highly difficult to detect fraud during an urgent payment discussion. 

They can mimic the voices of executives or suppliers with so much accuracy by using as little as 30 seconds of public audio. These synthetic voice clones can then bypass traditional verbal verification processes by replicating specific accents and mannerisms perfectly, making them incredibly difficult to detect during urgent payment discussions.

2. The Lurker Email Attack

Next is the lurker email attack. Instead of immediate phishing activity, some financial criminals and hackers will remain silent inside an email server for an extended period of time, monitoring vendor relationships and payment cycles. When they come across a high-value invoice, they’ll intercept the thread with a fake version containing their own banking details. 

This often fails to trigger security warnings as the communication takes place within a legitimate email chain. 

3. KYB (Know Your Business) Exploitation

The third type of fraudulent activity to watch out for when looking at invoice fraud is KYB exploitation. Many businesses will rely on automated KYB checks; however, fraudsters are now beginning to use hybrid identities to intercept these systems. They’ll mix real corporate data with fake details and create profiles that pass basic verification, hiding fraudulent entities in your vendor list. 

These profiles are designed to appear legitimate, which allows fake suppliers to remain unnoticed for long periods of time. 

How to Prevent Invoice Fraud in 4 Steps

To successfully prevent invoice fraud, your business will need to begin implementing robust safeguards when it comes to your payment processes. Here’s how: 

1. Mandatory Callback Verification

Make sure that you implement mandatory callback verification to prevent verifying bank changes via contact information found in the request. Use a pre-verified number to call back your vendors before any updates are made to new payment destinations. 

2. Dual-Authorisation for Bank Updates

Updating banking details should never be done by only one person. Having dual-authorisation means that you ensure every supplier modification is reviewed independently by a secondary manager. 

3. Use of Invoice Fraud Detection Technology

When you implement specialised invoice fraud detection systems, you add another layer of security which is able to scan for digital anomalies, like new domain names or altered PDF metadata. 

4. Frequent Master File Audits

Your business needs to ensure that it regularly audits its vendor database to help identify inactive accounts or any discrepancies in registration. When you cross-reference payment data with legal entities, it will prevent synthetic suppliers from remaining hidden within your systems. 

Operational Security Checklist to Prevent Invoice Fraud

Adopting a proactive stance requires consistent execution. Share this checklist with your procurement and finance teams to ensure your defences remain strong in preventing invoice fraud:

  • Secure vendor changes: Never allow unverified bank updates requested via email or phone. 
  • Independent verification: Only use pre-verified phone numbers for out-of-band confirmations. 
  • Automated scanning: Ensure you use detection tools to check for any irregularities in billing and metadata changes. 
  • Second-level approval: Make sure you implement manager reviews when it comes to master file updates. 
  • Monthly vendor audits: Ensure that you regularly deactivate old accounts and match all banking information with business data. 

Being able to efficiently implement invoice fraud detection and prevention will take some time and effort, but it is crucial in being able to protect your business from any major financial losses. When you use modern technology to implement strict verification processes, you’ll begin seeing security as a powerful asset. 

If you’re looking for a better, more efficient way to implement secure identification verification, be sure to check out our new ID scan and biometric checks page. Get in touch with one of our expert team members today for more information on how to begin!