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Equiniti Riskfactor Masterclass

How Can You Spot A Fraud?

31 May 2022

This month in the EQ Riskfactor Expert's Corner, Dan Smith, reviews portfolios and explains how you can use them to help spot frauds.

In the current climate we are increasingly hearing about incidences of fraud as businesses are under growing cash pressures and there is less liquidity in the market than we saw through the pandemic (thanks to government grants and funding support).

You can create several portfolios within EQ Riskfactor which can help to spot frauds earlier. As covered in earlier blogs, the Risk Score is an excellent indicator of the general health of a business and brings together some essential key measures. However, this is not the only measure to review. There is a wide range of data available in EQ Riskfactor and when combined with a relationship manager's knowledge of client trends our technology can help you to spot fraud faster.

Teeming And Lading

T&L

Teeming and lading is a bookkeeping fraud also known as short banking, delayed accounting, and lapping. It involves allocating one customer's payment to another customer's account to make the books balance. Or creating fictitious invoices and then using some of the availability generated to pay back the borrowings, making it look like the invoice was paid.

This fraud is now widespread and can be difficult to detect, and can very easily lead to high levels of write-offs. The client's standard risk score improves over time and can lead the client manager to think they are funding a well-managed, growing client.

Ones To Watch

270522

We have seen several fraud cases over the last couple of years where these three events coincide.

This portfolio highlights a combination of things. A high CD (Cash Desperation) percentage indicates that the client is cash hungry and the DSO (Days Sales Outstanding) alarm means that the invoices are not being paid as expected. Again, this relies upon an accurate Target DSO. Finally, the Sales Movement percentage indicates growth.

There is high growth and the client takes every last penny against the additional invoice it submits.

Yet, despite the growth and the apparent buoyancy of the client's business, the client cannot obtain timely payment for the new invoices.

Reports

It's important to remember that you can set any portfolio as a report. This is particularly helpful if you want to monitor a certain client proactively. We recommend a weekly report to look for trends and customers appearing on these, before undertaking extra validation such as DV's and checking paper trails etc.

We run regular training sessions with clients looking at fraud cases, how to set proactive portfolios, hindsight reviews and more. We will cover some of this through our masterclass series. However, if you want to arrange a tailored session for your business, please reach out to your Account Director.

Contact Us

This article explained how to use portfolios proactively to identify unusual activity and spot the signs of fraud.

If you have any additional questions, please reach out to your Account Director. If you are new to EQ Riskfactor, please contact us below.

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