How to Fortify Supplier Fraud Prevention

by Ashley Poynter

Content Manager

Spot These 5 Scary Fraud Tactics and Fortify Supplier Fraud Prevention

Supplier fraud prevention is a lot like living in a horror movie, except instead of masked villains chasing you through dark alleys, you’re dealing with fraudsters lurking in your inbox, waiting for the perfect moment to siphon money from your company. The scariest part? These attacks sneak in through well-crafted emails, seemingly legitimate requests, or very convincing phone calls.

But here’s the good news: you don’t have to be the victim who trips over nothing while running from the bad guy. You can turn your supplier verification process into an impenetrable fortress with the right knowledge and tools. We’re here to help you spot the most common fraud tactics and give you the right supplier fraud prevention tools to fight back.

Let’s break down the most spine-chilling fraud tactics haunting your supplier relationships—and, more importantly, how to defend yourself like a pro.

The Vendor Impersonator: Wolves in Supplier Clothing

The Executive Impersonator: CEO Says What?

The “Deepfake” Supplier: When Seeing Isn’t Believing

The Phishing Trap: Click at Your Peril

The Culture of Exceptions: Your CEO Is Not That Special

The Manual Process Trap Stifling Your Supplier Fraud Prevention

Keep the Monsters Out and Boost Supplier Fraud Prevention with Automation

Get Ready for Vendor Management Appreciation Day 2024

Want Help Aligning Teams to Prevent Business Payments Fraud?

Interested in Regular Tips to Prevent Business Payments Fraud?

Want Personalized Guidance to Prevent Business Payments Fraud?

The Vendor Impersonator: Wolves in Supplier Clothing

Imagine you get an email from a supplier you’ve worked with for years letting you know they’ve changed their banking details. Seems routine, right? WRONG. Vendor impersonation fraud is becoming increasingly common because it’s ridiculously easy for scammers to spoof email addresses. A simple tweak in their email domain, and before you know it, you’re transferring large sums to a fraudster’s offshore account. One little click, one slight oversight, and ::gulp:: you’re part of their next great payday.

Fraudsters play on your trust—knowing you’re familiar with this vendor—and they count on the fact that you’re busy and won’t think twice before updating those payment details. This tactic is like a wolf in sheep’s clothing, slipping across your vendor desk unnoticed.

How to fortify supplier fraud prevention

Pick up the phone. When in doubt, call your vendor and verify any changes to banking information directly. A five-minute conversation can save you a world of hurt. Just be sure you’re calling the correct contact phone number. In fact, listen to Hannah Kanouff, Vendor Management Coordinator for the Office of Central Procurement at Penn State University, speak to the importance of verifying contact info and how this can cause delays:

Use secure systems. Your first line of defense is automating the vendor verification process with a robust platform. Don’t rely on email alone; email is as secure as a straw hat in a hurricane.

The Executive Impersonator: CEO Says What?

Ah, the dreaded email “from the CEO” asking for a last-minute wire transfer. It’s urgent, of course. It always is. You’re already feeling the pressure, and you leap into action when the boss sends an email. But here’s the plot twist: that email isn’t from your CEO. It’s from a clever scammer impersonating them, playing on the urgency of the request and banking (pun intended!) on the fact that no one will second-guess the big boss.

This tactic, often called “Business Email Compromise” or BEC, is scarily effective. Why? Because it preys on the assumption that when the C-suite calls, you don’t ask questions—you just do. But helping a scammer siphon off company funds? That’s not what you signed up for.

How to fortify supplier fraud prevention

Confirm through different channels. When you receive a high-pressure email request, verify it through a different method. Pick up the phone, send a message through a different platform, or walk over to the CEO’s office if possible. It might feel over-cautious, but it’s a small price to pay to avoid a significant financial loss.
Implement a formal approval process. No wire transfers or big payments should happen outside of a documented process—no matter who asks. Automation is key here. With the right system in place, you can ensure that no last-minute, “urgent” transfers bypass your established security protocols.

The “Deepfake” Supplier: When Seeing Isn’t Believing

If you thought deepfakes were just for viral internet videos, think again. Fraudsters now use this technology to impersonate C-suite executives on video calls and score millions. That’s right—they can actually “appear” as your trusted contact, but it’s all smoke and mirrors. This tactic might sound like sci-fi, but it’s happening in real life.

Imagine jumping on a quick Zoom call with “your supplier,” where everything seems legit because, hey, you’re seeing their face, hearing their voice, right? Not so fast. With deepfake tech, scammers can manipulate audio and video to create an uncanny impersonation of someone you trust, and you wouldn’t even know it’s fake until it’s too late.

How to fortify supplier fraud prevention

Don’t trust visuals alone. Just because you “see” someone on a video call doesn’t mean it’s really them. Stick to secure, multi-step verification processes for any changes in vendor details. Bonus tip: Ask the person about something that happened within the past 24-hours. If they cannot answer, this is a red flag.
Use automation. Automated tools help vendor managers ensure everyone follows processes to a T. This ensures that payments only go to the suppliers who are supposed to receive them.

The Phishing Trap: Click at Your Peril

Phishing emails are the bread and butter of fraudsters—easy to send and surprisingly effective. All they need is one unsuspecting click on a malicious link, and they’ve gained access to your company’s sensitive data. These emails often look convincingly official, with familiar logos and professional-sounding language. Once they trick an employee into clicking, it’s like opening a portal to your company’s most critical information.

Whether it’s stealing login credentials, payment information, or worse, phishing emails are the ultimate gateway for scammers. And with hundreds of them sent every day, it’s only a matter of time before one slips through the cracks.

Think your supplier fraud prevention is up to the challenge? Think again.

How to fortify supplier fraud prevention

Educate your team. Regular training sessions can go a long way in helping employees recognize the warning signs of a phishing email. From funky URLs to unexpected attachments, knowing what to look for can be the difference between a close call and a total disaster.
Enforce two-factor authentication (2FA). Even if someone does click on something they shouldn’t, 2FA acts as a safety net. It makes it much harder for fraudsters to gain access to your systems. Yes, it’s an extra step, but it’s a small inconvenience for a huge increase in security.

The Culture of Exceptions: Your CEO Is Not That Special

We’ve all been there—your company has a well-documented process for vendor payments, but then someone from the executive team asks for an “exception.” “Can you just bypass the process this one time?” they’ll ask. It’s a direct request from the top, so what could possibly go wrong?

Here’s the problem: when you start making exceptions, you open the door to fraud. Fraudsters love companies with a culture of exceptions because they know that once those boundaries are blurred, it’s harder to spot when something is off. And what happens when the fraudster isn’t a higher-up but someone pretending to be? Can your accounts payable (AP) team tell the difference?

Angela Sarno, here at PaymentWorks, tells it straight when it comes to the severity of the culture problem and why the process is useless if nobody follows it.:

How to fortify supplier fraud prevention

Standardize your process—and stick to it. More importantly, Write It Down (look, we already created a template for you!). When you’ve got solid automation and a no-exception policy in place, there’s no room for fraudsters to slip in under the guise of urgency. Automation also removes the human error factor, ensuring consistent checks across the board.
Empower your AP team. Give your vendor desk the authority to say, “No exceptions,” even when the request comes from the C-suite. If your team knows they’re backed by clear, standardized rules, they’re better equipped to spot fraudulent attempts to circumvent the process.

The Manual Process Trap Stifling Your Supplier Fraud Prevention

Manual processes are like a playground for fraudsters. Why? Because humans make mistakes. Whether it’s data entry, invoice approval, or tracking payments, manual processes are slow, error-prone, and leave plenty of room for exploitation. Fraudsters love manual systems because they can easily slip through the cracks, taking advantage of the confusion and chaos that often comes with them.

Relying on manual processes is like leaving the front door to your business unlocked. It’s “closed,” so it may seem secure. You may even have a fancy lock in place. But if you never use it (or you use it incorrectly), it’s as good as not having a lock at all.

On the other hand, automation removes the risk of human error, from vendor onboarding to patent approvals. It ensures every transaction is processed according to strict, consistent rules, making it far more difficult for fraudsters to manipulate the system. It’s the easiest, most secure way to bolster supplier fraud prevention.

Moreover, it centralizes vendor management, so you have a single source of truth for all vendor communications, payment details, and changes. A centralized, automated system keeps everything in one place, making it much harder for fraudsters to sneak in and exploit any gaps.

Keep the Monsters Out and Boost Supplier Fraud Prevention with Automation

Supplier fraud isn’t going anywhere. In fact, like the ultimate movie villain, it’s evolving—getting sneakier, more sophisticated, and harder to spot. Even when the good guys win, the bad guy always comes back in the sequel.

Here’s the good news: you can win in the sequel as well. You don’t have to be the victim who gets taken down by the bad guys.

A deep understanding of common fraud tactics paired with supplier fraud prevention best practices and automation allows you to fortify your vendor management system and make it nearly impenetrable. Stop relying on manual processes, quit making “just this once” exceptions, and start leveraging technology that can outsmart even the most sophisticated fraudsters. The more automated and standardized your processes are, the less room there is for error—and the harder it is for scammers to weasel their way in.

In this horror flick, you get to be the hero, and the story ends with you closing the door on fraud for good.

Get Ready For Vendor Management Appreciation 2024

You know what’s really spooky? Missing out on the second annual Vendor Management Appreciation Day (VMAD)! Will you join us?

Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.

Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2024 celebration, and we want you to be a part of it!

VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.

Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.

In the meantime, learn more here, and grab some free vendor management goodies.