09.02.16
Combating invoice fraud in the public sector
Source: PSE Feb/Mar 16
Bel Temel, payments manager for the London Borough of Bexley, explains how the council is tackling a sophisticated form of financial crime.
Invoice fraud is on the rise, according to Financial Fraud Action UK. Unfortunately, this crime is sweeping across the UK, with the public sector no exception – and my own experience at Bexley highlights the severity of the situation. In recent years, I have witnessed multiple attempts of fraud against the local authority. Bearing in mind that Bexley’s money comes from the taxpayer, the borough has a real commitment to tackling fraud and remaining financially responsible.
Bexley has received fake invoices from anonymous professional fraudsters on more than one occasion. All our supplier contract information is on our website, in line with government requirements. This does however mean that we’re at risk of scammers accessing this information and pretending to be one of our suppliers.
In most cases, the criminals have taken information from the internet to ensure the bogus invoice looks identical to the template of one of our suppliers. Generally, the only way the naked eye can spot any difference is by cross-referencing the bank details with those we have listed for our supplier. This means that in most cases, the fake invoice makes it through every stage of the payment process before being picked up by us in the finance team. Unfortunately, other local authorities have lost money by not spotting this and paying the balance of a fake invoice into the fraudster’s bank account.
One way we’ve managed to combat the problem is by implementing electronic invoicing across our finance function. In 2006, we implemented electronic invoicing from Tungsten Network (formally OB10). This was considered fairly forward-thinking, as we were only the second local authority to invest in this technology at that time. Initially, as we were breaking new ground, there was a huge learning curve. We had to communicate the change in process to our suppliers, and take-up was a little slow at first.
However, the process has been significantly streamlined, with our supplier contracts now stating that this is the authority’s preferred method for receiving invoices. As a result, many of our largest-volume suppliers now transact with us via the network.
The benefits of electronic invoicing go far beyond simply reducing paper. With our suppliers submitting invoices through the platform, we know that every invoice received is 100% legitimate. The technology ensures the secure transacting of invoices, as it will have validated the data and checked the electronic signature to ensure it matches that specific supplier. If an invoice does not match with any of the requirements, it will be automatically rejected. Also, because we know we receive invoices electronically through Tungsten, if we received a paper invoice from a supplier that uses the platform, alarm bells would ring immediately.
This has significantly helped us combat invoice fraud and since our take-up of the technology in 2006, many other local authorities have followed suit. Handling this process online gives us much more control and helps ensure we spot all the signs if we were to receive a fraudulent invoice. In fact, the system has been such a success that we now process over 20,000 invoices a year through the network.
At London Borough of Bexley we are committed to protecting our ratepayers’ funds and the use of electronic invoicing is helping us do this.
“Other local authorities have lost money by paying the balance of a fake invoice into the fraudster’s bank account.”