Supply Chain Fraud Risk Severe
Thursday, May 8th, 2008Bank Technology News | May 2008
|
|
The risk in supply chains is growing as businesses expand their outsourcing efforts, says risk-consulting firm Kroll of New York. A survey found that 42 percent of companies had suffered from either theft of physical assets or other incident of supplier fraud, a problem which has manifested itself from lost or stolen funds to the importation of dangerous materials (remember melamine in pet food?)
As part of some corrective steps, Kroll points out that the payment and financial activity with a supplying vendor could provide fraud-vetting clues for companies and their financial institutions. Among the suggestions is that firms modernize accounts payable systems to fully automate purchase order/invoice comparisons and gain more understanding into the calculation of charges. Traders must also invest in data mining and reporting capabilities to figure out where payment matching and approval systems are weakest: falsified invoices that have telltale signs of dramatic payment increases to one vendor; a high number of transactions conveniently coming in under audit thresholds; or consecutive invoice numbers or multiple same-day invoices.
One important tip, which apparently no technology can duplicate: keep the lines of communication open with potential tipsters by following departmental dynamics. “While logistics managers or executives may wield the power to navigate weak controls to perpetrate fraud, they have a harder time fooling those working closely with them. Eventually, they try to get rid of non-conformers or exclude them…” according to Kroll.
Posted in Risk Management | No Comments »
