Introduction
According to a recent global survey, generative AI is identified as a significant factor contributing to the increase in invoice fraud by 62% of businesses. This exacerbates the challenge of distinguishing between legitimate and fraudulent documents as the volume and sophistication of attacks increase.
In addition to this issue, ninety percent of organizations do not have dedicated fraud prevention teams, which necessitates accounting staff to manage fraud in addition to their regular responsibilities. This frequently results in resource constraints and increased vulnerability. The results were disclosed in the ‘The Rise in AP Fraud’ report by invoice automation company Basware, which was conducted by sharedserviceslink. The research surveyed 100 global business leaders and CFOs to determine the extent of their exposure to financial misconduct and the protective measures they have implemented. Fraud is becoming more prevalent, sophisticated, and detrimental to enterprises. Seven out of ten organizations (68%) reported fraud attempts in 2024, with 62% indicating that these attempts had deteriorated over the previous year.
The financial consequences are staggering. Global losses of $485 billion were the consequence of fraud schemes, which included bank fraud, last year. A quarter of respondents (25%) identified remote work and decentralized operations as significant contributors to this surge. Remote work increases the vulnerability of accounts payable (AP) departments by undermining internal controls, which complicates the prevention of fraudulent activities.
Simultaneously, approximately 25% of respondents identify the expansion of the supplier base (25%) and the increase in transaction volumes (29%) as critical risk factors. AP teams are confronted with a greater degree of complexity as a result of the increased volume of invoices to process and the increased number of suppliers to manage. This, in turn, increases the probability of errors or deception.
The combination of these external threats creates a perfect storm of challenges, which facilitates the exploitation of vulnerabilities in the AP workflow by fraudsters. The intricacy and increasing volume of fraudulent attempts have left AP departments overwhelmed, as they are on the frontlines of fraud detection and also manage supplier payments.
Attacks have become more convincing and difficult to detect as a result of the proliferation of increasingly sophisticated tactics, including phishing schemes, deepfake media, and fake invoices, which are driven by generative AI. Consequently, generative AI is now cited as a significant factor in the increase in AP fraud by two-thirds of enterprises (62%). Increasing the risks and delays associated with the resolution of legitimate disputes, tools like ChatGPT facilitate the mass production of communications and false invoices. Information becomes fragmented when it is processed by multiple disconnected systems, which makes it more difficult to identify patterns and allows fraud to pass undetected.
A man from Lithuania was involved in a high-profile case of AP fraud. He defrauded Facebook and Google of over $120 million by assuming the identity of a legitimate supplier. He obtained $99 million from Facebook and $23 million from Google by utilizing fraudulent invoices. The fraud underscored the significant financial losses that can result from vendor impersonation and phony invoices in the absence of robust AP safeguards, even for large enterprises.
90 percent of organizations lack dedicated fraud prevention teams, which results in understaffed and under-resourced AP teams prioritizing speed over detailed checks, thereby creating vulnerabilities, according to the survey. Meanwhile, teams are susceptible to errors, inefficiencies, and fraudulent activities due to their dependence on paper-based processes and insufficient statement reconciliation.
AP fraud is one of the most frequently targeted categories of fraud for businesses. The survey indicates that 28% of organizations attribute the absence of AP automation to the inability to combat fraud. Businesses are ill-prepared to manage complex, high-volume transactions due to their reliance on manual processes and outmoded tools, which creates critical gaps for fraudsters to exploit.
KION, a global leader in forklift vehicles and warehouse equipment, is an example of how automation has strengthened AP fraud prevention. Previously, KION was susceptible to fraud risks as a result of manual invoice processing.
KION collaborated with Basware to resolve these obstacles, transitioning to automated AP processes that were powered by AI. This change significantly diminished manual errors, thereby reducing the likelihood of deception. KION has optimized its operations, thereby reducing the likelihood of errors or AP fraud, by ensuring that invoices and payments are accurately validated. This has been achieved by controlling over 90% of its expenditure. Additionally, KION has improved its visibility, control, and oversight.
Read: Transform Your B2B Strategy with Innovative Invoicing Solutions
Industry Comments
Tom Santacroce Global VP of AP Assurance, commented on the findings:
“Manual processes are inherently slow and prone to errors, making it difficult to match invoices, track approvals, or identify duplicate payments – creating exploitable gaps for fraudsters, who are now using GenAI. For overburdened AP teams, these create the perfect storm of challenges, leading to operational bottlenecks, strained supplier relationships, and lost cash flow.
“Forward-thinking organizations are reimagining fraud, overpayment and risk prevention through AI and automation that protects against increasingly complex financial threats. Remote work has weakened traditional security, requiring secure systems and innovative solutions like decentralized finance and blockchain for transparent vendor transactions. With increasingly sophisticated fraud tactics on the uptick, organizations must prepare for stricter AI and compliance rules. Proactive fraud prevention today not only mitigates risk, but also future-proofs operations against costly penalties.”
FAQs
1. What is Generative AI, and how is it related to AP fraud?
Generative AI refers to advanced artificial intelligence systems, like ChatGPT, capable of generating content such as fake invoices, emails, and other documents. This technology has made it easier for fraudsters to create convincing fraudulent communications at scale, making it more difficult for AP teams to distinguish between legitimate and fraudulent documents.
2. How does the rise of remote work contribute to increased AP fraud?
Remote work, by decentralizing operations, weakens internal controls and exposes AP departments to greater vulnerability. This environment makes it easier for fraudsters to exploit gaps in the system, increasing the risk of undetected fraudulent activities.
3. What are the financial impacts of AP fraud?
In 2024 alone, 68% of organizations reported experiencing fraud attempts, with global losses from fraud schemes, including bank fraud, reaching $485 billion last year. The financial impact of these crimes is staggering, underscoring the importance of effective fraud prevention strategies.
4. How can automation help reduce the risk of AP fraud?
Automation streamlines the AP process by reducing manual errors and improving visibility. With AI-powered systems, businesses can more accurately validate invoices and payments, reducing opportunities for fraud. Automated tools also offer real-time monitoring, making it easier to spot and prevent fraudulent activities.
5. Can automation completely eliminate AP fraud?
While automation significantly reduces the risk of AP fraud by minimizing errors and increasing oversight, it’s important to combine automation with other security measures and regular fraud detection protocols. A multi-layered approach is essential to safeguard against evolving fraud tactics.
Conclusion
The rise of AP fraud, fueled by generative AI and exacerbated by remote work, poses significant risks for businesses worldwide. With fraud attempts becoming more frequent, sophisticated, and damaging, it’s crucial for organizations to adopt advanced fraud prevention tools. Automated AP solutions powered by AI can significantly reduce manual errors, improve transaction transparency, and offer enhanced fraud detection capabilities. By streamlining processes and leveraging technology, businesses can better protect themselves from financial loss, ensuring safer and more efficient financial operations. Adopting such solutions will not only safeguard against fraud but also drive greater operational efficiency and trust in the financial ecosystem.
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