Types of Fraud that Your Industry Cannot Ignore

May 14, 2024
6 mins read
Types of Fraud that Your Industry Cannot Ignore

    In today’s fast-paced business landscape, staying vigilant against fraudulent activities is more critical than ever. With the rise of digitalization and automation, fraudsters have found new ways to exploit vulnerabilities in data extraction and document handling processes. Some companies have turned their attention to data extraction software (OCR API) like Veryfi that guarantees data extraction accuracy on any type of document submitted. More than accuracy, the fraud detection API by Veryfi supplements the core OCR APIs by detecting potential fraudulent documents submitted for data extraction. Utilizing fraud signals, it scrutinizes each submission and employs triggers to flag suspicious JSON responses in an effort to get ahead of fraud before those document submissions get paid out.

    Companies in all industries should fear these common scams. At scale, they threaten the livelihood of a business. As a result, companies who do touch any digital or physical document must be using a capable OCR software that detects fraud. It’s critical that data managers and OCR software are aware of the various types of document fraud being commited. The following are the four most common document fraud fields or types of fraud that companies should avoid by using OCR with fraud detection:

    1. Document Velocity: Fast and Endless Submissions

    Document velocity refers to the rate at which documents are submitted or processed within a given timeframe. While swift document processing is often a sign of efficiency, abnormally high document velocity can indicate fraudulent activity. Fraudsters may attempt to flood the system with a high volume of documents to bypass detection mechanisms or exploit loopholes in approval processes.

    Unchecked document velocity can lead to several consequences for businesses. First and foremost, it increases the risk of overlooking fraudulent submissions, resulting in financial losses and damaged credibility. Moreover, rapid document processing can strain resources and compromise the accuracy of data extraction, leading to errors and compliance issues.

    2. Manipulated Handwriting:

    Handwriting manipulation involves altering or forging handwritten content on documents to deceive recipients. In the digital age, where handwritten documents are increasingly rare, fraudsters may exploit this rarity to perpetrate fraud. This is especially prevalent for certain industries like real estate and supply chain management where falsifying signatures, altering figures i.e. adding zeros and commas, or fabricating entire documents where handwriting is involved is not uncommonly done. Manipulated handwriting can be difficult to detect without an advanced fraud detection API that routinely filters and checks one document against the rest. At the same time, more than half of documents with fabricated handwriting are submitted as photos of those documents. Yes, you’re correct: actual photos of LCD monitors/screens and photoshopped photos. The creativity is amazing! Veryfi Fraud detection API detects submitted documents that are photos of LCD monitors and screens using a set of triggers and their attributions, catching it every time *on the backend*. On the frontend, you can always implement Veryfi Lens mobile document capture for your apps so that it can extract and detect manipulated handwriting that your app users submit.

    The repercussions of untreated manipulated handwriting can be severe. In addition to financial losses resulting from fraudulent transactions, businesses may face legal repercussions for unknowingly accepting forged documents. Moreover, the erosion of trust between stakeholders can have long-term implications for business relationships and brand reputation.

    3. Manipulated Photos: A Picture Worth a Thousand Lies

    In an era dominated by smartphones and high-resolution cameras, photos have become an integral part of document submission processes. However, this reliance on visual documentation also opens the door to photo manipulation techniques employed by fraudsters. From digitally altering receipts to doctoring invoices, manipulated photos can be used to create false evidence of transactions or expenses. Besides using Veryfi Lens document capture for preventing fraud which puts the onus on the user, companies can get ahead of this by implementing fraud detection API.

    Failure to address manipulated photos can expose businesses to various risks. Apart from financial losses resulting from fraudulent claims, businesses may encounter compliance issues and audits due to inaccuracies in documentation. Additionally, reputational damage stemming from perceived negligence in document verification can undermine trust with clients, partners, and regulatory authorities.

    4. Duplicate Documents:

    Duplicate documents refer to identical or nearly identical submissions of the same document within a short timeframe. While occasional duplicates may result from genuine errors or system glitches, excessive duplication is often indicative of fraudulent behavior. Fraudsters may submit duplicate documents to exploit reimbursement systems, inflate expenses, or conceal illicit activities.

    The consequences of overlooking duplicate documents can be far-reaching. From inflated costs and erroneous financial reporting to compliance violations and regulatory scrutiny, the implications of unchecked duplicates extend beyond immediate financial losses. Moreover, repeated instances of duplicate submissions can erode internal controls and tarnish the organization’s reputation for accuracy and integrity.

    Safeguarding CPG Revenue Against Fraudulent Receipts

    In the competitive landscape of Consumer Packaged Goods (CPG) companies, the battle against fraud is relentless. Fraudsters are increasingly sophisticated, crafting fake receipts with inflated amounts, photoshopping them, and submitting them to loyalty programs for illegitimate rewards. For CPG companies, this poses a significant threat, leading to substantial revenue losses if left unchecked.

    Without robust fraud detection services like Veryfi’s, CPG companies face an uphill battle against fraudsters. On average, these companies lose out on 22% of total revenue by issuing redeemed points and rewards for fraudulent receipts. Consider a $5 million revenue-grossing CPG company; this equates to a staggering $1,100,000 in losses. For smaller CPG companies, the impact is even more severe, amplifying the urgency for effective fraud detection measures. Now, imagine if your bank or payment provider skips fraud detection and processes a fake check or credit card payment that ends up drawing money out of your personal accounts. Fintech fraud is similarly committed in these four ways. Read on to understand how various fintech verticals including corporate spend management, mobile banking, and BNPL are all susceptible to document fraud.

    By implementing solutions like Veryfi’s Fraud Detection Service, CPG companies can safeguard their revenue and reputation. These advanced AI-driven tools scrutinize each submission, flagging potential fraud signals like manipulated photos and duplicate documents. With proactive fraud detection, CPG companies can protect their bottom line, ensuring that rewards and incentives are rightfully earned by loyal customers, not exploited by fraudsters.

    Preventing Losses Incurred by General Document Fraud in this Digital Age

    In an increasingly digitized and interconnected business environment, the threat of document fraud looms large. Companies must equip themselves with robust fraud detection mechanisms to safeguard against the various forms of document fraud discussed above. By leveraging advanced AI-driven technologies like Veryfi’s fraud detection API, businesses enhance their ability to detect and mitigate fraudulent activities proactively.

    Veryfi’s AI-powered fraud detection API never stops scanning for signs of potential fraudulent activity. These signs act as flags, indicating specific issues. For instance, if a duplicate signal is triggered, its corresponding flag value will be set to “true”. The fraudulent documents are matched against other submitted documents in the system, rejected, and processing automatically stops–stopping fraud right in its tracks. Fraudster accounts are flagged. Data managers are alerted in the API Portal. Company never needs to lift a finger to prevent losses. Fraud detection automates loss prevention.

    Remember, vigilance is the key to staying one step ahead of fraudsters. By prioritizing fraud prevention and investing in comprehensive fraud detection solutions, businesses can protect their financial interests, preserve their reputation, and uphold their commitment to integrity and transparency.

    Create a free Veryfi account to try ∀Docs OCR. Check out the API Documentation for ∀Docs to see how you can implement Veryfi’s CPG Toolkit for your CPG brand. Book a session with Veryfi to figure out your use cases.