Electronic invoices reduce fraud in the pharmaceutical sector
Businesses continue to get stung by fraudsters, with invoice fraud just one method that criminals deploy to deceive business owners and their employees. Research in the UK by e-invoicing provider Tungsten Network shows the total invoice fraud loss each year equates to more than £9bn.
According to Alphus Hinds, Head of Cyber Security and Risk at Tungsten Network, invoice fraud has affected all businesses, with the pharmaceutical sector no exception.
“Tungsten’s latest research reported that more than half (51%) of all pharmaceutical businesses surveyed reported that they had received at least one fraudulent invoice and a staggering 31 per cent said the fraud totaled more than £5,000,” said Alphus.
A big contributory factor is the format invoices arrive into a business. Nowadays, an invoice might be a paper document, a PDF scan of a hard copy or totally electronic. It could arrive via post, email, web portal, or uploaded directly to an accounting system. It could even be a confusing combination of options.
“As a result,” warned Alphus, “there are multiple ways for criminals to corrupt an invoice or the invoice process and employees must be vigilant to thwart all the potential scams.
“Also, where invoices are arriving via email, they don’t always get sent to a member of the finance department. This means everyone in a business needs to be alert to the potential for fraud and understand their part in identifying something suspicious before sending it on.”
According to the research, popular methods affecting the pharmaceutical industry included embedding a virus in an attachment (46%), being notified of false change in account details by email (25%) and sending duplicate invoices (16%). It’s easy to see how pharmaceutical professionals could be duped when there are so many variations of tactics used.
For companies that operate globally there is even more risk, said Alphus: “The more countries you operate in and the more complicated your payment process, then the more opportunity fraudsters have to target your business.
“For example, cross border transactions could have VAT and other forms of tax applied across different locations. In addition, there are certain higher risk parts of the world where you need to be particularly alert and agile to understand the complexities of operating in that market and how to protect your business. For a global industry like the pharmaceutical sector, this is worrying.”
Tungsten’s research shows us that nearly half are concerned by fraud (45%), with 55% of all pharma companies stating that they see cybercrime in general as the single biggest threat to their business.
However, close to 1 in 6 (16%) said they would take no action or be unsure of what action to take if they did receive a fraudulent invoice. “It’s imperative that pharmaceutical professionals understand the ways to prevent invoice fraud and also the appropriate action to take if they receive a suspicious invoice or correspondence,” said Alphus.
“One method to eliminate your chances of being deceived is to move to electronic invoicing. The real strength of adopting a technical solution is that it shifts some of the responsibility for checking an invoice from your finance team to a highly sophisticated, automated-service provider that is expert in building business-specific rules which invoices are validated against. To an extent, therefore, an e-invoicing service provider does some of the checks and balances in relation to invoice fraud for you.”
Tungsten research indicates there is a large proportion of people working in the pharma sector who don’t feel sufficiently prepared to deal with invoice fraud, Alphus continued. “The old fashioned method of paper invoicing puts a lot of pressure on the financial professionals to spot mistakes. That’s where e-invoicing technology really adds value – by taking the pressure of the finance team and automating the validation process, the finance department’s time is freed up to undertake other tasks and you immediately eliminate risk.”
Invoice fraud is on the rise and nobody is out of danger. Only last month the headlines featured huge corporations Apple and Netflix, as they became the latest victims. According to Financial Fraud UK, in 2015 online fraud rose by 64 per cent on the year before to reach £133.5million.
The pharmaceutical sector needs to be aware of the high risk of potential for invoice fraud and professionals need to be equipped to deal with the challenges that could present themselves. “Technology is here to help and pharma businesses should embrace it as a way to protect themselves and their suppliers,” concluded Alphus.