The Southbourne Tax Group Do you really know who you are paying?

The Southbourne Tax Group: Do you really know who you
are paying?
From fake invoicing and pay-and-return schemes to personal purchases with corporate funds and payment
fraud, fraud in the procurement-to-pay process is very common and extremely difficult to prevent and detect.
According to the 2016 Report to the Nations on Occupational Fraud and Abuse by the Association of Certified
Fraud Examiners (ACFE), fraudulent disbursements are the most common form of asset misappropriation. Of
all the types of fraudulent disbursement, billing schemes are the most common with an average of 22.2% of the
cases and a median loss of £80,000 ($100,000).
The following real-life examples illustrate common scenarios of procurement fraud in small- and medium-size
enterprises: the first case study is a real-life example of an electronic disbursement fraud while the second and
the third relate to billing schemes.
Case study 1: MediaCo
Jenny was managing the finance and administrative activities of MediaCo, a small media production company
specialising in documentaries for TV, co-founded by Kevin and Ivan.
Over time, Jenny found an easy way to boost her wages. When approving payments, Kevin always cross-
checked the invoices and payment details thoroughly, while Ivan approved the payments without double-
checking them against the invoices. From time to time, Jenny would enter her sister’s bank details into the
online banking system instead of a supplier’s account details. She would then submit the payment for approval
to Ivan. Ivan would approve without noticing that the bank details on the payment were different from those
specified on the supplier’s invoice. After a couple of weeks, when she knew that Ivan was out of the office, she
would include the same vendor invoice in a payment (with the correct vendor bank details) and ask Kevin to
approve it.
Jenny was the only one who managed the accounts at MediaCo, and she could easily allocate the cost of the
fraudulent payment to a number of P&L accounts to cover up the shortage.
One day, she was forced to stay at home for a couple of weeks through illness, and the co-founders’ personal
assistant covered for her. Following a call from an angry vendor who complained about not receiving payment
on his last invoice, the personal assistant looked into the finance files to check whether the invoice had been
paid. Thus it was discovered that by paying invoices to her sister’s bank account, Jenny had managed to
embezzle approximately £60,000 ($75,000) over a three-year period.
Case study 2: KitchenCo
Matt was the marketing manager for KitchenCo, a medium-size bespoke kitchen manufacturer.
He convinced the company’s owner of the need to invest approximately £100,000 ($125,000) to improve
KitchenCo’s online presence. The owner did not have any background in online marketing and social media