Fraud, in all of its forms, remains a persistent challenge.
Procurement fraud, one of the oldest types of fraud, remains prevalent and poses a significant concern for businesses of all sizes and sectors worldwide. The PwC Global Economic Crime Survey 2024 reveals that procurement fraud is among the top three most disruptive economic crimes globally in the past 24 months, following cybercrime and corruption. Although ample data and enterprise resource planning systems support diligence in procure-to-pay processes, advanced technology can also enable sophisticated procurement fraud when used by criminals.
As companies expand into new markets or source from new countries, risks increase, particularly when operations are located far from educational centres. Finding qualified professionals for key roles can be difficult, and implementing training on conflict of interest, procurement processes, and fraud controls may be slow or irregular. To address these issues, management should reassess risk assessment procedures, intensify training efforts, and consider improved controls that leverage data analytics and automation.
As per PwC Global Economic Crime Survey 2024, nearly 20% of companies do not use data analytics in any way to identify procurement fraud. Industrial Manufacturing (IM) lags all Other industries in this regard, signalling significant opportunity to employ more advanced fraud detection techniques. In contrast, Technology, Media and Telecommunications (TMT) leads in analytics use, with of companies using some form of analytics to identify procurement fraud, including to analyse transactions before they close and to conduct real-time monitoring of payments. TMT’s analytics use likely contributes to why a smaller share of those in the sector report the procurement fraud they experienced had a serious impact.
Moreover, many companies lack awareness of the extent of their losses from procurement fraud. Nearly a third (32%) do not attempt to quantify these losses, while another third (31%) only do so only on an irregular or on an ad hoc basis. The TMT sector, along with Financial Services (FS), leads in quantifying these losses, whereas IM trails, with only 17% assessing procurement fraud losses at least annually.
In terms of mitigating procurement fraud risks, the majority of companies are enhancing processes related to documentation and authorisation, as well as revising vendor selection procedures.
Fewer companies are adopting data analytics, though the TMT sector stands out for using analytics to detect unusual bidding patterns. The Energy, Utilities, and Resources (EUR) sector also ranks highly in analytics use, reflecting its significant concern over procurement fraud. This concern is understandable given the sector’s involvement in major capital expenditure projects and challenging operational environments, which necessitates a robust approach to risk management.
The PwC Global Economic Crime Survey 2024 provides insights and recommendations from leading practitioners:
Transaction monitoring solutions for procurement fraud employ sophisticated algorithms and machine learning techniques to detect suspicious activities and patterns in transactions. By analysing vast amounts of data, these solutions can identify potential instances of fraud, such as overbilling, kickbacks, and collusion. Enhancing these solutions with graph analytics allows companies to visualise and analyse complex relationships between entities such as suppliers, employees, and third parties. Due diligence using publicly available company records helps organisations map relationships and connections, providing a more comprehensive understanding of the beneficial owners of third parties and identifying potential conflicts of interest or hidden relationships. This combination of transaction monitoring and graph analytics can significantly reduce the risk of procurement fraud and other improper payments.
