Olympic Delivery Authority taken for a ride (to Wolverhampton?) with invoice fraud

We’ve asked this before - is procurement (in its widest sense) fraud on the increase? Is it driven in part by economic pressures, and perhaps also by the general feeling that “everyone is in it for themselves”, whether that is politicians, premiership footballers or bankers. So why shouldn't I take what I believe I “deserve” when I see everyone else apparently doing the same?

Whether or not it is increasing, there was another interesting example in the press last week. The UK Olympic Delivery Authority (ODA) and the construction firm Skanska were the victims of what appears to be a fairly simple but elegant fraud.

The fraudster contacted the ODA at a time when a large invoice payment was due to Skanska. As the BBC reported:

“He obtained the £2.3m by pretending to be Skanska's finance director and writing to the ODA with a change of account details ahead of a bank transfer. The account details he gave were his own”.

Pretty damn simple really…. the fraudsters also tried the same thing with other Skanska clients, including Dorset Council, Network Rail and Universal Builders Supply. The reports don't say what happened there - perhaps their systems were good enough that no money was paid to the perpetrators.

But given that the ODA said 95% of the money had been “recovered” one assumes that the ODA did actually make payments.  It was always going to be discovered of course – a short time later, one assumes Skanska called the ODA and said, “Oi, where's our dosh”? Or the equivalent in Swedish.

At which point, after some desperate tracking down of payment details, all would become clear. It seems that the fraudsters relied on covering their tracks by the time it was discovered, and they had worked out a fascinating money laundering route, whereby the money would go off to Nigeria, but would then be used to “buy a parade of shops in Wolverhampton”.

Now, let's take a short detour from the serious point here. If I had successfully got away with a couple of million, I can think of a few things I might do / buy. Luxury hotels, champagne, and a certain member of the GB cycling team might even come into it. (No, not Sir Chris Hoy).

But I have to say, a parade of shops in Wolverhampton wouldn't be high on my list! Oh well, each to their own, as they say…...

But what can we learn from this? Well, flippancy aside, it confirms how vital it is to have accurate supplier data, and robust processes around seemingly mundane issues such as recording of bank details. It doesn’t say much obviously for the ODA’s processes in this area, although they say; "Our payments system was reviewed and strengthened immediately after the incident to further limit the risk of fraud."

It’s also interesting to speculate that if ODA and Skanska had been able to communicate very quickly and easily, a rapid check would have discovered the fraud before money changed hands.

That’s another potential benefit from the trend towards more collaborative “social media” type links between buyer and seller that we’re seeing - firms from Tradeshift to Wax Digital, GXS (with Rollstream) to SAP are all looking to make that communication much more natural. So a quick tweet or facebook wall type communication from ODA, via a collaborative supplier platform, to the contact in Skanska saying “Hi Sue, can you confirm you’ve changed your bank details” would have stopped this in its tracks.

But whatever your current systems and processes, it’s worth looking at whether your organisation would be vulnerable to something as simple but potentially effective as this fraud.

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Voices (4)

  1. John Diffenthal:

    The victim was South Lanarkshire Council and the amount was £102,000.

  2. John Diffenthal:

    This type of fraud has become more common since Transparency legislation requires local and national bodies to list monthly payments by supplier against invoices over £500. I think that SOPO mentioned a Scottish Council that had been caught by it last year.

  3. Navy Cut:

    We did some work on the opportunity for using purchasing cards in ODA some time ago, the initiative was stymied because the then Head of Finance wanted to have an approved purchase order before anyone could use a card for any amount of spend at all.

    Sounds like they were focussing on the wrong area.

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