Top 10 payment frauds and how to hide them

Often us auditors get told, “there’s some payment fraud in that entity, can you check it out”… and that’s all the information we get. This can be daunting because there are a thousand ways to fraud. And you may have millions and millions of lines of data in your SAP system. So where do you start?

To lend you a hand we have devised the top 10 payment frauds, and how these tend to be hidden:

1/ Purchase of goods or services that are not required by the organization

  • Hidden by using generic material codes
  • Hidden by keeping the value under approbation limits

2/ Purchase of overpriced goods or services

  • Hidden by using multiple material codes for the same item
  • Hidden by not using the same material codes for purchasing and sales

3/ Purchase of goods or services from shell companies

  • Hidden by ensuring that only one purchaser works with the shell company

4/ “Accidental” overpayment that is intercepted following reimbursement

  • Hidden by adding credit notes/ credit note lines to the payment transaction

5/ Company credit cards for personal purchases

  • Hidden by entering employee expenses through manual journal entries rather than the expenses system

6/ Flip-flop IBAN numbers in the supplier master data

  • Hidden by switching back the IBAN number quickly so that it doesn’t get noticed

7/ Payment of salaries to ghost employees

  • Hidden by using employees that have left
  • Hidden by using employees in remote areas
  • Hidden by using employees that do not require IT access or building access

8/ Purchase of consulting/ training/ bailiff/ legal/ charitable/ membership services from fictitious organizations

  • Hidden by not mentioning the purpose of the expense
  • Hidden by booking the expense to an unusual cost centre/ cost centre that is not monitored
  • Hidden by not mentioning the organization address, phone number, etc.

9/ Duplicate payments

  • Hidden by sending the same invoice to two different entities
  • Hidden by adding “V2”, “BIS” or something else to the supplier invoice
  • Hidden by not having a goods receipt or purchase order for the invoice

10/ Modification of the payments file following export from SAP and before sending to the bank

  • Hidden by making the modifications outside of the SAP system
  • Hidden by creating fictitious supplier invoices to support the payment expense

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