Digital Transformation » Cyber Security » Fraud is going up – is your business prepared?

Fraud experts use the Fraud Triangle to focus attention on the three conditions that make fraud more likely: pressure, opportunity, and rationalisation. The current pandemic has created a situation in which all three conditions are rife.

Pressure

The presence of financial pressure is widespread, with job losses and reduced incomes. Within businesses, suppliers are trying to protect cash, sales reps are trying to make quota, and executives are trying to hit a revenue forecast. The pressure to cut corners is great.

Opportunity

In normal times, stringent supplier onboarding protocols and screenings help to protect a business from the unscrupulous and unviable. But in moments of turmoil, time is too short to examine every new business partner in detail. The opportunity for fraud increases. Even seemingly solid business partners may be tempted to make promises and take payment for goods and services they cannot deliver.

With traditional controls loosened and many businesses letting down their guard, AP fraud may be easier to commit and to hide. Your compliance leaders and auditors cannot travel to uncover potential weaknesses in your protocols. Many businesses are supporting their employees by making funds available for their work-from-home environment, but this introduces the potential for double-dipping and other fraudulent activities.

Rationalisation

There are always those who find a way to rationalise fraud, but in tough times some find that justification comes much more readily. Under financial pressures, it can be much easier for them to feel that skirting the rules is necessary, or at least acceptable.

Another factor can be resentment against the employer. An aggrieved party can be far more willing to take advantage of perceived opportunities. And they might think the scale of their fraud is so small, the company won’t be harmed.

So what can an organisation do to counter fraud?

With costs under great strain and no funds for adding investigative staff, how can you stop would-be fraudsters? By rethinking your controls regime and mining the data already coursing through your enterprise systems, you can identify, investigate and remediate potential fraud — and even prevent it from happening in the first place.

Rethinking your audit controls

Leading companies are rethinking their approach from compliance as a performative exercise (“look at my process and my trusted advisors: I must be doing it right”) to compliance as an operational discipline (“the data show that it’s working”), driven by a continuous and automated review of payables and expense transactions, vendors, conflicts of interest, and more.

How do you do it, without an army of analysts?

AppZen’s AI reads financial documents – like invoices, POs, receipts, and contracts – and extracts meaning from all the structured and unstructured data in those documents to identify the problems before you pay, making the spend audit process near real time rather than being reactive as it is today. Our approach has four key differentiators:

  • We read 100 percent of transactions and line level items. Our AI can process a huge volume of transactions, and is extremely accurate at recognising when something is awry.
  • AppZen remembers every transaction and document it’s ever processed, so we can spot duplicates across invoices over time or across departments, and find price or quantity anomalies with ease.
  • Context matters, so we leverage the power of Star Match, which references an unlimited number of data points from documents, business systems and online sources to validate every transaction before payment.
  • Our large customer base means we’re continuously learning from collective experience, insight and problems. We can spot patterns in transactions because we’ve seen them in other places.

We pair the power of scale with the controls to let customers build custom spend policies, controls and risk levels, providing insights that help companies rely less on an auditor’s luck in catching bad actors and more on a systematic, data-driven and fair approach. What’s out of policy for one company could be fine at another. On the supplier side, we look at every transaction and determine if there are patterns of risk over time that point to serial abuse or mismanagement.

An AI-driven business spend fraud mitigation program is quick and easy to start with a short payback period. No big IT project is required. Spend is reduced by catching and preventing duplicates, wasteful or over-the-limit spend, data entry typos, incorrect receipts, invoice anomalies, out of policy expenses – all before money goes out the door.

With AppZen, organisations can use rule- and AI-based tools to automate reimbursement approvals while also understanding where the biggest spending categories are. Most companies don’t have the manpower to look at all expenses and randomly choose a small number to review. AI tools can automate that, and help organisations to save money in the future.

At a time when teams are being asked to do more with less, AppZen can help your business to streamline process and identify errors, waste, and fraud.

In our first article, which you can read here, we described how AppZen developed the most sophisticated AI platform available to finance teams and in our second, how AI software can prevent your AP process from leaking spend. Join Anant Kale at 2pm on 18th June for Strengthening the Finance Function against Shock and Uncertainty. Register for CFO Virtual Agenda here.

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