May 29, 2024

Weekly Business Insights 05/29/2024

GenerativeAI use cases on Accounts Payable fraudulence. Given the large variation in use cases and a high volume of daily transactions, human auditing capacity is limited. This is where AI assistance proves invaluable.

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GenerativeAI use cases on Accounts Payable fraudulence

  1. Internal  Control Abuse: Exploiting weaknesses in internal controls, such as lack of segregation of duties or inadequate approval processes. This could involve employees manipulating purchase  orders or bypassing approval workflows to process fraudulent payments.
  2. Third-Party  Payment Diversion: Fraudsters might target third-party payment processors by hacking into their systems or manipulating data to divert payments intended for legitimate vendors.
  3. Invoice Re-routing: Fraudsters might intercept invoices and reroute them to their own email addresses, allowing them to manipulate the invoice data before it reaches the accounts payable     department for processing.
  4. Data Breaches: Data breaches exposing vendor or employee information can be exploited for fraudulent activities. Hackers might use stolen vendor data to create fake invoices or impersonate     legitimate vendors to initiate fraudulent payments.
  5. Non-inventory Purchases: Purchasing fictitious inventory items or diverting real inventory for personal gain. This can involve collusion between employees in purchasing and warehouse departments.
  6. Asset Misappropriation: Employees might misappropriate company assets, such as office supplies or equipment, and then create fake invoices to cover their tracks.
  7. False  Pretext Schemes: Fraudsters might create a  sense of urgency or exploit a lack of knowledge to trick employees into authorizing fraudulent payments. This could involve claiming to be a new     vendor or a representative of an existing vendor requiring immediate payment for an "emergency" purchase.
  8. Refunds  Fraud: Employees or external fraudsters might  exploit vulnerabilities in the refund process to issue unauthorized refunds to themselves or accomplices. This could involve manipulating     refund requests or intercepting legitimate refund checks.
  9. Split  Invoice Fraud: A vendor splits a single legitimate invoice into multiple smaller invoices to bypass approval thresholds for larger purchases. This allows the fraudulent invoices to slip under the radar and be processed without proper scrutiny.
  10. Product  Substitution Fraud: A vendor supplies lower-quality products or substitutes cheaper alternatives for the ones ordered, while still charging the agreed-upon price for the original, higher-quality goods. This can be difficult to detect without proper receiving procedures and quality control measures.
  11. Phony Discounts: Fraudsters might create fake invoices offering significant discounts on goods or services to entice employees to process the payment quickly without verifying the legitimacy of the offer. This often preys on pressure to secure "good  deals."
  12. Currency Manipulation Fraud: In international transactions, fraudsters might manipulate exchange rates or inflate foreign transaction fees on invoices to divert additional funds for their     own gain. This requires vigilance and careful review of currency     conversion details.
  13. Fictitious Service Fees: Vendors might add bogus service fees or hidden charges to invoices that were not previously agreed upon or communicated. This can be difficult to detect without a thorough review of invoice details and a clear understanding of contracted service costs.
  14. Fictitious Contract Termination Fees: Fraudsters posing  as legal representatives or a terminated vendor might submit invoices for fabricated contract termination fees. This can exploit confusion or lack     of clear communication during contract termination processes.
  15. Cyber Invoice Manipulation: Hackers might infiltrate  a company's system and manipulate existing electronic invoices, altering payment details or routing them to unauthorized accounts. This     necessitates strong cybersecurity measures and data integrity checks.

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