Procurement Fraud – What is the Cleverest Example You’ve Seen ?

Yesterday the first of this year's BravoSolution Real World Sourcing series events took place at the new venue of the Jugged Hare, London. I was presenting on the topic ”Spend Analytics – the Next Generation”.

We will have a more detailed review of the event early next week, but one of the areas we covered was how spend analytics and (the somewhat clichéd) “big data” are opening up opportunities for more focus on detecting fraud in procurement-related areas. This is a fascinating topic, and it is always good to keep eyes open for various examples that hit the press every now and again. If you want to read a recent and interesting example, featuring the US Navy and a Malaysian businessman known as “Fat Leonard,” read our sister website, Public Spend Matters Europe here!

Anyway, I’m also writing a briefing paper on the topic right now, looking at various types of procurement fraud and what can be done to reduce the risk of our organisations suffering from these issues. What is clear is that some frauds are very easy to spot and the risk attached can be reduced to virtually zero by some simple actions. For example, firms have been caught out by fraudsters contacting them, claiming to be a genuine supplier, and saying “we’ve changed our bank details, please now pay our invoices to this account.”

Now it doesn’t take too much thought to come up with of a couple of basic process and system precautions that could be implemented and which would make this fraud pretty much impossible. But other types of fraud are less straightforward and create more challenge when we try and think of ways of making sure we don’t get caught out.

Which got me thinking – what is the toughest procurement-related fraud of all to prevent? I have an idea, but rather than discussing it now, I would love to hear what our expert readers can come up with. Whether it is based on some personal experience you have had*or you are thinking conceptually, what is the cleverest, hardest to protect against or detect procurement related fraud you can come up with? It doesn’t matter if it is perpetrated by an insider, an outsider or both in tandem, let us know what you think.

We would love to see your ideas, and a bottle of something good for the best answer – drop us your idea as a “comment” below.

* I don’t mean you executed the fraud of course, just that you saw it happen ...!

Voices (2)

  1. Bitter and twisted:

    How many brilliant frauds are going on out there undetected?

    My thoughts

    “Receiving” is the red headed stepchild of the procurement process,

    It’s better to try to make fraud unhideable than uncommitable.

    For the clever fraudster, the big challenge is laundering rather than stealing.

    Those ****ing aircraft carriers.

  2. Bill Atthetill:

    The toughest (one which I’ve seen with my own eyes, following an investigation) was when a group of people were colluding in the fraud, not just one person. It took place in Facilities. All of the orders and invoices were below a specific value, the originator, authoriser, and budget holder (authorising the budget for invoice payment) were all involved in the scam. The external supplier was run by an ‘organised crime’ family. It took 8 months of covert investigations to join up the dots and get all of them. The lead ‘Trojan Horse’ had £300k in his personal bank account when we caught them but they had a paper trail for every penny (related to being paid as an adviser by the supplier).

    The award to UK’s dumbest fraudsters must go to the two who ran scams in the NHS. The first fraudster was found selling the goods (computer consumables) on her own eBay site. (She told her colleague in procurement about her website…) The second fraudster was found awarding contracts to his own IT company and, with all the confidence in the world, he put a sticker on his office wall declaring the value he had defrauded the NHS that month.

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