The financial services industry gets hit with more fraudulent invoices than any other industry, found a recent report from eInvoicing firm Tungsten Network. At least, that’s what the data would suggest.
But Tungsten Head of Compliance Lucy Ashdown offered her take on the company’s research to discuss why FinServ firms might be seeing more invoice fraud than other industries. Plus, in the context of recent legislative efforts from U.K. officials to combat fraud, Ashdown also discussed who carries the torch of responsibility when it comes to fighting this kind of security lapse in the enterprise.
Late last month, Tungsten Network reported its findings on invoice fraud: U.K. businesses in the financial services industry see more fraudulent invoices than those in other sectors. This particular market, researchers found, sees more than $240 million in losses every year.
One-fifth of financial services firms say they believe invoice fraud cost them about $7,300 last year. While less than half of companies across industries in the U.K. reported having been sent a fake invoice in the last year, 60 percent of financial services firms acknowledge they’ve been hit with the crime.
According to Ashdown, while invoice fraud is far from a new phenomenon, it was the pervasiveness of the crime that surprised Tungsten.
“We were definitely concerned by the scale of the problem,” the executive said, adding that the financial losses reported by these companies in the survey are “staggering.”
The other big shock from the survey? The fact that financial services professionals are so aware of the problem. Tungsten’s research revealed that 61 percent of FinServ firms perceive invoice fraud as their biggest threat and 58 percent reported concern over rising cybercrime — 4 percent more than the national average across verticals.
Ashdown said Tungsten was intrigued by this finding, with financial services professionals citing invoice fraud as a greater concern than losing a significant contract, the activity of their competitors or even losing a top member of their staff.
“This was an unexpected finding as we hear so much about the challenge of staff retention and keeping ahead of the competition,” she explained. “It just goes to show that, although financial crime has always existed, it is becoming increasingly difficult to manage with new digital methods casting a significant shadow over businesses of all shapes and sizes.”
Who’s To Blame?
Why are financial services firms getting hit with invoice fraud so much more frequently than the rest of the market? According to Ashdown, it’s not that FinServ players aren’t strategizing against this crime.
“Our experience of FinServ companies is that they are just as sophisticated, if not more so, than other sectors in terms of compliance,” the executive noted, “so I don’t think it’s down to sector failings that they are receiving more fraudulent invoices.”
Instead, she added, cybercriminals are likely targeting financial services players more often than other verticals. Or, it could be that financial services firms are able to better identify fraudulent invoices.
The latter would suggest that companies of all sectors are facing financial losses from fake invoices — even if they don’t know how bad the problem is.
Ashdown said government regulation can be a first line of defense for these businesses when combating invoice fraud. She cited the recent launch of the Joint Fraud Taskforce, as well as the U.K.’s fight against money laundering, as two examples of how policymakers are helping corporations keep their finances secure.
But they fall short in some ways, she said.
“A lot of the U.K. government’s focus to date has been tackling consumer fraud,” Ashdown said, adding that broader legislation, like AML policy, will certainly have at least a partial focus on invoice fraud but won't be entirely dedicated to the crime.
Further, she said, while government efforts can provide advice for businesses facing invoice fraud, it’s not enough.
“I do think there is probably more that could be done to educate businesses about the particular threat that invoice fraud poses and what employees should do if they encounter a fraudulent invoice,” she said.
There’s no guarantee that the government will initiate more invoice fraud-targeted legislation, so Ashdown is advising corporations to take matters into their own hands.
The recent media attention around high-profile security breaches has helped raise awareness, she said.
“While government crackdowns can help, I think the burden of responsibility lies with each company, their finance team and individual employees,” explained Ashdown.
Electronic invoicing means having the capability of digital signatures and automated invoice validation, she explained, while automated security checks can add another level of protection for companies.
But to implement a digital security strategy, businesses must constantly be on top of the problem. That means keeping up to date with regulation and compliance efforts, as well as maintaining awareness of new tactics used by cyberthieves.
“Invoice fraud is definitely a global problem. The more countries you operate in, the more complicated the payment process becomes and the more opportunity fraudsters have to target your business,” explained Ashdown. “As the world turns digital, opportunities to illegally access and use information are growing by the day, as are the criminals who exploit these opportunities.”
Ashdown described the effort as admittedly “daunting.” But that doesn’t mean impossible, especially thanks to innovations like digital payments and documentation and other technological security measures.
“In this day and age, there is no real reason why companies of all shapes and sizes shouldn’t embrace this technology and, therefore, work more efficiently and securely,” she declared.