B2B Payments

Invoice Fraud Hits Microsoft?

Invoice fraud — changing details so that money is routed to fraudsters’ bank accounts — may have hit Microsoft through one of its own employees. Elsewhere, Patisserie Valerie finds a huge cash shortfall, and a new report details that payments fraud seems inexorably on the rise.

Even the mightiest of tech firms are not immune to invoice fraud. Engadget reported that Jeff Tran, Microsoft’s former director of sports marketing and alliances, was charged with five counts of wire fraud. The former executive of the tech giant was charged with trying to embezzle as much as $1.5 million from the company.

The site noted that, among the alleged fraudulent actions, Tran stands accused of sending two fraudulent invoices to Microsoft, and those invoices were sent to the company from other vendors.

In detailing the invoice fraud, Engadget said that, in one of those two cases, an invoice for $775,000 was allegedly routed to a bank account belonging to Tran. In the other instance, an invoice request for $670,000 led to suspicion on the part of the vendors, and they in turn contacted Microsoft. Prosecutors have said that Tran destroyed his communications about the invoices, and asked the vendors to lie to Microsoft. Ultimately, he returned the $775,000 to Microsoft. Wire fraud has a sentence of up to 20 years’ imprisonment.

Fraud On The Rise

Against a larger backdrop, fraud is on the rise, as evidenced in a boost of noncash fraud. As reported by the Federal Reserve Payments study this week, the value of noncash fraud has gone up between 2012 to 2015, and the measure along that time frame grew by 37 percent to $8.3 billion. The value of noncash payments overall increased by lockstep to $180.3 trillion.

The data, said the Fed, came from surveys of depository institutions in 2012 and 2015, and payment card networks in 2015 and 2016.

Payments fraud was up between 2012 to 2015, driven by card fraud. Perhaps predictably, “remote” card fraud also gained ground. Overall, there was $.46 of payments fraud for every $10,000 of payments fraud in 2015, up from $.36 in 2012. Credit card fraud over that same time frame and measurement grew from $16.95 to $17.13.

Payments Fraud No Cakewalk

In allegations of payments fraud in Europe, Finance Director Chris Marsh of Patisserie Valerie, a U.K. chain of cafés, was recently arrested in the wake of what the company has deemed “significant, and potentially fraudulent, accounting irregularities.” Marsh was released on bail and had been suspended by the firm, and the company said there was a “material shortfall” between the reported status of the company’s financial health and the current financial status.

The firm said it had cash in hand of roughly $38 million, and now has $13 million in debt. The company called for an immediate capital injection. Reports this week said there had been “secret overdrafts” totaling in £10 million (more than $13 million). Credit facilities were allegedly set up with Barclays and HSBC, and had been nearly tapped out by the time fraud was uncovered. Chairman Luke Johnson had come in with a rescue package to stave off bankruptcy worth as much as £20 million.

Blockchain For Invoices

In terms of individual company initiatives, invoice finance platform Incomlend, based in Singapore, said it has embraced InvoiceCheck — a blockchain tool that can be used to detect if an invoice has already been paid, possibly by another party. The blockchain solution, according to reports, can use decentralized ledger technology and cross-reference activity — based on the Ethereum platform — to find if an invoice may perhaps be fraudulent or “double” paid.

As reported, Incomelend Executive Director Raj Uttamchandani said that “a bank or factoring company simply enters basic invoice parameters to perform an initial check in less than 30 seconds. This data is stored on the blockchain and funders are alerted if there is a potential risk of double-financing.”


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.