Generative AI is Fueling a Surge in Invoice Fraud

Are we looking at Generative AI through rose-tinted glasses? Gen AI can help streamline AP processes, reduce errors, and improve efficiency. But… Gen AI is also a dream tool for cybercriminals, looking to commit invoice fraud and create fake invoices in a matter of minutes.

Generative AI – friend or foe?

Invoice fraud is a financial scam that’s been around for years, but it’s evolving. Fake invoices created and submitted to individuals or businesses to trick them into making payments. New technology like Gen AI is able to create fake documents that look realistic. And, because Generative AI tools like OpenAI’s ChatGPT are available to everyone online, we’re seeing an increase in financial fraud.

This would strongly suggest that with Generative AI, a new generation of invoice fraud is coming!

For instance, Gen AI could create tens of millions of invoices at a low cost. Then, send it to millions of email address. This being a new angle on invoice fraud, means that a large proportion of those fake invoices will fly under the radar and be missed. 

Why? 

Because although they’re cheap and churned out by a ‘machine’, manual fraud checks will make it nigh on impossible to match with vendor lists, purchase orders, and pre-approved spending. Document chaos being the norm, and with an ever increasing number of invoices coming from more and more sources, the need for efficiency and diligence is essential.

Is there a solution? Sure. First, let’s get some background…

Invoice fraudsters get creative with Gen AI

Invoice fraud is when fake or deceptive invoices are created. The intention being to deceive individuals or businesses into making payments for goods or services that weren’t delivered.

Using Gen AI, fraudsters can quickly generate realistic invoices that copy exactly the format, style, and branding of real invoices. These fake invoices are proving to be a challenge for businesses trying to distinguish between genuine and fake documents.

It’s worth saying that invoice fraud has been a thing for years. Before AI hit the scene. We’ve seen fake or hijacked vendor accounts, hijacked employee accounts, vendor fraud from dodgy companies, and employee fraud. Brought about by a website with domain names that are oh so similar to the genuine site, or an email address with one letter changed.

According to an FBI report in 2021, business email compromise (BEC) scams, such as invoice fraud, accounted for an average loss of over $120,000 per incident. Costing businesses more than $2.4 billion in 2021.

A few years back, you may have read about the manager at a property firm in Scotland, who stole £900,000 between 2016 and 2019. The money used to fund a luxury lifestyle, parties, holidays, sporting events, and the like. It was stolen via rental payments from tenants transferred into the perpetrator’s bank account, deposits taken that weren’t needed, and the creation of fake invoices for large sums of money for supplies and business expenses. Finally caught after a tenant questioned the property firm, this is surely proof that businesses need to up their game with regard fraud.

Fighting Generative AI fire with AI fire

Is there a solution? Sure…

Fight fire with fire. Use AI as a defense against Generative AI invoice fraud.

Generative AI has the ability to produce realistic content. And that’s the attraction for fraudsters. An easy route to creating convincing phishing emails, fake invoices, and generating malware.

Obviously, there are security measures already in place to detect fraudulent attacks, but with the introduction of Gen AI, attacks are becoming more sophisticated.

In the same way that we’re all wised up to phishing emails – bad spelling and grammar, email address a bit off – we can train AI to recognize inconsistencies, errors, behavioral changes, etc., in incoming documents. Then reject them.

The easiest way to find out if something has been written by AI is to use AI.

We’re looking at a kind of AI gateway. An entrance exam for AI-related operations or data, that if a document fails to pass successfully, is rejected. Data would flow through the gateway, be processed and analyzed by AI in the following ways…

  • Centralized monitoring and analysis via an AI gateway that acts as a hub for incoming documents. Where AI algorithms, tools, or applications are deployed to to monitor and analyze all incoming document traffic in real-time.  
  • AI-powered fraud detection that’s trained with historical data to identifying anomalies, irregularities, or patterns associated with fake invoices. Using machine learning to analyze metadata and continuously learn and adapt to new AI threats as they emerge.
  • Advanced verification protocols to include cross-referencing invoice details – bank account number, address, PO number – with historical data, vendor legitimacy checks, and confirmation of transaction consistency. With an AI-document processing solution connected to your ERP system to automate data validation and eliminate the risk of bad data entering.
  • Natural language processing algorithms analyze the language used and the content of invoices. Finding anomalies in the linguistic patterns that suggest fake content.
  • AI-powered image analysis that examines graphic elements in invoices – logos, signatures – to identify alterations, inconsistencies.
  • Behavioral analysis and pattern recognition to analyze and identify patterns or behaviors associated with genuine and fake invoice transactions. With changes in standard patterns triggering alerts.

Be prepared for what’s coming

AI technology will continue to get more and more sophisticated. There is an urgency for businesses to have a strategic plan for controlling this technology before chaos reigns. At the same time, panic won’t help, and we should recognize that this emergence of advanced AI systems doesn’t have to be something to dread. AI shows huge promise with regard to helping address global challenges. 

It’s our responsibility to acknowledge the hazards that AI poses and be ahead of the game with risk management strategies to address them.

Fraud can cost your business financially and reputationally. The longer a fraud goes unnoticed, the more damage it’ll do. Relying on manual fraud detection will be your business’ undoing. Using AI technology to fight fire with fire will strengthen your risk management strategy, identify fraudulent activity, and protect your business reputation

Be ready!

Are you ready for a new wave of invoice fraud?

Generative AI is a dream for AP teams looking to streamline processes vs Generative AI is a dream for cybercriminals looking to perpetrate invoice fraud. We can help you fight fire with fire!