Overcoming cross-border invoice frauds through new Hashgraph technology
Tags: Excess Inventory, Crossborder, Blockchain, Distributed Ledgers, Fraud

Did you know fraudulent invoices caused the highest losses across all scam types in 2019? According to a report published by the ACCC businesses lost a whopping $132 million to scams, where most losses were due to invoice frauds.

How and why is invoice tampering done?

An invoice is a time-stamped mercantile document which records a transaction between a buyer and a seller along with the quality, quantity and value of items purchased by the seller. The invoice mentions the total value and remittance details of the beneficiary that the buyer uses to send invoice value to the seller’s account. Tampering the value and bank details is a common fraudulent practice that often leads to either of the parties suffering huge losses. A seller or a hacker might commit fraud by knowingly submitting false, tampered, inflated invoices to make money out of the same. “False invoices” refer to invoices for goods or services not rendered. “Duplicate invoices” are fraudulent if issued knowingly with the intent to defraud with changes that are unknown to the buyer or the remitter(International Anti Corruption Resource Centre, 2020).

With digitalization across all channels of trade and payments, the potential opportunity for hackers and individuals to defraud the buyers is ever increasing. Invoice fraud has become so common that when denim company Diesel Jeans filed for bankruptcy earlier this month, the company cited invoice fraud for contributing significantly to its financial woes. Google and Facebook paid out $23 million and $100 million, respectively, to a cybercriminal from Lithuania, who pleaded guilty to wire fraud in New York this week (Fazzini, 2019). It easy to see that even digital platforms and banks are facing the wrath of invoice fraud — banks like Barclays have established a separate department to inform and manage these issues for their business banking customers.

Who is the target of invoice fraud?

The primary target for these befooling buyers or sellers is the personnel from the finance and procurement department of the target company (buyer company). Most trading companies have traditional systems for their financial and information operations, which allows hackers to deceive the payment approvers with fraudulent invoices and secure payments. The transactional sizes are kept below US$100k, so they can pass through scrutiny and immediately processed, by these authorizers.

What is the best solution?

There a few critical steps that need to be taken by finance and procurement managers to protect their company and position from losses through these documents and one of the most potent solution comes from the advanced technology itself called Hashing. This technology helps in embedding the unique digital fingerprint into an invoice/ document. A hash converts a set of numbers and letters into an encrypted output of a fixed length. In-case, if such a hashed invoice is tampered with there results in a change in the digital footprint, and hence the original invoice hash will never match the hash of the manipulated invoice. This kind of technology is a significant advance over blockchain and is significantly cheaper and faster to process making it extremely effective and attractive propositions to resolve invoice scamming issues. (Pim | V-ID, 2019)

Maalexi is one of the companies that use advanced hashing technologies to prevent invoice frauds and provides a secure platform for cross-border trade.

Works Cited

Fazzini, K. (2019, March 28). Retrieved from CNBC: https://www.cnbc.com/2019/03/28/how-to-avoid-invoice-theft-scam-that-cost-google-facebook-123m.html

International Anti Corruption Resource Centre. (2020). Guide to combating corruption and fraud in development projects. Retrieved from IACRC: https://guide.iacrc.org/potential-scheme-false-inflated-and-duplicate-invoices/

Pim | V-ID. (2019, August). Retrieved from Medium.com: https://pim-vee.medium.com/lets-get-rid-of-fake-invoices-right-now-f96381e700da