UK Finance: Invoice Fraud A Threat To Business

Invoice fraud looms as a threat to businesses in the U.K., contends UK Finance, with thousands of fraud cases and tens of millions of pounds in losses — in just the first half of 2018. Elsewhere, the former CFO of Bankrate gets jail time for accounting fraud.

Much has been said about the impact late payments can have, and have been having, on businesses in the United Kingdom. But what about the impact of invoice fraud?

As noted this past week, a report from UK Finance found that invoice fraud remains a threat — as claimed by Verdict, a “major threat” — to businesses located there. Invoice fraud is defined as taking place when companies send money to bad actors who change account details, and money is then sent to accounts belonging to the fraudsters instead. In many cases, the scams are successful because criminals pose as suppliers and get the unwitting victims to change routing details, according to what looks like “official” requests.

The numbers are a bit sobering. UK Finance stated that in the first six months of the year alone, there were 2,856 cases of invoice fraud, wreaking as much as £49 million (more than $64 million USD) in damages in terms of funds stolen. The average amount that was stolen on an individual basis came to more than £17,200.

The impact is not limited to invoice fraud. UK Finance also stated that “CEO fraud” is afoot, where a legitimate payment is attempted, but the criminals look to intervene, redirecting the funds by impersonating the head of the company. The average amount pilfered here came to more than £23,000.

The total tally of fraud, according to the report, came to more than £500 million. This includes “retail” scams aimed at individuals, fooled by criminals acting as law enforcement or banks themselves.

Legal Reckoning For Bankrate CFO

In terms of individual cases, The Wall Street Journal reported that Edward DiMaria, the former CFO of financial services firm Bankrate, has been sentenced to 10 years in prison, stemming from charges of securities and accounting fraud, which led to as much as $25 million in shareholder losses. He was also ordered to pay more than $21 million in restitution to the firm’s holders.

The former executive plead guilty to the charges — one count of conspiracy to make false statements to accountants and another count of conspiracy to make false statements to the Securities and Exchange Commission (SEC). He had also falsified Bankrate’s books and accounts. He had done so in an alleged effort to inflate earnings, where he had released reserves to boost the bottom line.

The Department of Justice (DOJ) announced the news earlier in the week and the indictment had been handed down in December. The news followed other Bankrate-related headlines, where a former vice president of finance and a former accounting director had been accused by the SEC of being part of that scam, which led to Bankrate settling with the SEC for $15 million in 2015. Those executives also settled with the SEC or were sentenced to jail time.

Separately, Mississippi Today reported that two former employees of Coahoma Community College have been charged with one of the largest embezzlement schemes in the state’s past two decades. Stacie Neal, who worked in the college’s accounts payable office, and administrative assistant Gwendolyn Jefferson embezzled $758,000 between the years 2013 to 2017. The state auditor said the duo had used government procurement cards to buy gift cards, which were used to buy items as far-ranging as watches and shoes.

Down Under, Fraud On Wheels

In one case of fraud, an unnamed dealership in Australia was hit with invoice fraud to the tune of $65,000 AUD (nearly $47,000 USD). The scam was traced to an invoice that was to be paid with funds routed into a new account.

The fraud prompted Western Australia’s commissioner for consumer protection to warn that businesses selling high-ticket items must be wary of such scams. Authorities in Australia, MyBusiness reported, have estimated that losses tied to such scams have hit businesses for more than $4 million AUD thus far in 2018.