Glossary term
False Billing
Subject: Financial Crime, Fraud
Also known as: Invoice fraud, Fake invoicing
False billing is a scheme in which fake, inflated or duplicate invoices are submitted to obtain payment for supplies that were never delivered or were worth far less than billed.
Explanation
The invoice may come from outside or inside. External fraudsters mail demands that look like routine renewals, such as directory listings or domain fees, hoping an accounts clerk pays without checking. Inside schemes are often more damaging: an employee sets up a shell vendor or a fake supplier and approves its invoices, or colludes with a real supplier to inflate prices and share the gain. Duplicate invoices and altered bank details are also common. The fraud relies on volume and routine, because busy payables teams often pay what looks normal. Controls include three-way matching of purchase order, goods received note and invoice, vendor master data checks, approval limits and analytics that look for unusual vendors. Payables teams catch most of it by refusing to pay any invoice that lacks a matching order and delivery record.
Example
An employee in the purchasing team creates a vendor posing as a consulting firm, using her relative's bank account. Each month the firm submits an invoice just under the manager's approval limit for services never delivered. Internal audit runs a test matching vendor addresses to employee addresses, finds the link and traces payments totalling 120,000 over two years.
Not to be confused with
- Business Email Compromise (BEC)
- BEC impersonates a real person to redirect a payment. False billing uses fabricated or inflated invoices for work that was not done.