B2B Payments

Fraud Makes Headway Via ‘Payroll Diversion’

Fraud Makes Headway Via ‘Payroll Diversion’

Corporate fraud – from within the company, and from without – continues to make headlines and headway, with the past week having seen some revisits on stories from even a few years back.

In terms of fraud done digitally, one firm, Agari, has estimated that “payroll diversion” is “ramping up,” where HR administrators are being duped into sending payroll funds to fraudsters’ accounts.

The compensation is being sent on the directive of fictitious communications that ostensibly come from official directives from senior executives. The boon for the bad actors is that the scam eliminates the middleman, which would be the banks, and instead latches onto direct deposit activities.

Separately, the Patisserie Valerie fallout continues, as The Guardian reported that Luke Johnson, the multimillionaire chairman of the now failed and bankrupt firm, has made as much as 40 million pounds through the past five years, though has not been tied to any fraudulent activity (Johnson put 20 million pounds of funding into the firm amid its recent struggles).

This past week, dozens of outlets were closed, with 122 remaining open – and the ripple effects continue through the supply chain in the wake of a “potentially fraudulent” accounting setup that has left the company unable to get access to new funding. Earlier this month, the company said there have been issues with supplier payments being made in a timely manner, and has been the subject of investigations into a 40-million pound “black hole” tied to its financial accounts.

As part of the examinations into what went wrong at the chain, witnesses told a hearing of the Business, Energy and Industrial Strategy Committee that auditors might be unable to detect financial wrongdoing, and that management should always be the first place to look when fraud might be suspected. Steve Barber, AA audit committee chair, said that in cases like those seen at the cake firm, such activity would be hard to find. As has been reported, the audit landscape in the U.K. is dominated by four firms, among them KPMG, Deloitte, EY and PwC.

Separately, but also in the U.K., and tied to a case stretching back years, City A.M. reports that one executive who was cleared of false accounting charges stemming from a 2014 financial scandal at supermarket giant Tesco is suing the company. Chris Bush was acquitted at the end of last year, as were two other former employees.

The company said five years ago that it had overstated profits by as much as 250 million pounds, in part from early recognition of payments from suppliers. The firm entered a deferred prosecution agreement that levied a 129-million pound fine, and named the three executives as being “controlling minds” that concealed the financial position of the company – yet, as noted by the BBC, the prosecution at trial was unable to show that the defendants knew about such problems.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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