Criminals, fraudsters and other persons with bad intentions are becoming increasingly creative in defrauding account numbers. This increases the risk of money laundering and invoice fraud and non-compliance with regulations relating to KYC and AML. In addition, invoice fraud in business transactions is becoming more serious. Companies are therefore diligently looking for ways to improve their Know Your Customer processes in the CRM system; that is, before payment is made.
Invoice fraud is best known as a problem affecting private individuals. Everyone knows the e-mails and text messages that seem to come from CJIB or Ziggo. They ask - often in poor Dutch - to quickly pay an outstanding, usually modest, fine via iDEAL. However, such corporate frauds are usually more sophisticated and thus less easy to spot and often involve much higher amounts. To prevent fraud, companies therefore want to be able to thoroughly verify the billing vendors' payment details to ensure they are dealing with the right counterparty.
A common way fraudsters operate is to copy the layout of an original invoice and state on it that the account number has changed. Because the account comes from a known relation, people tend to trust this communication and the fraud can go undetected for a long time. The account number is changed in the records and the amounts payable are transferred to a fraudster in good faith. Fraudsters are becoming increasingly cunning, as practice shows. In 2020, for example, Bol.com transferred over 750,000 euros to what it thought was Brabantia, the well-known supplier of household products. However, it turned out to be scammers. They had informed via a forged email from Brabantia that the account number had changed. Bol.com transferred its payments to this new number, until a question from the real Brabantia as to where the money was kept put the online shop out of its misery.
1. Know Your Customer
To prevent invoice fraud, 'KYC' processes need to be greatly improved The methods used each have their pros and cons. Prove it is your account by providing a copy of the bank card or bank statement.
- Name and account number are easy to verify.
- The copy shows whether someone is an account holder in the case of an and/or account.
- No special software is needed, sending can be done via e-mail.
- There are no transaction costs for the company.
- Highly susceptible to fraud because a copy is easy to photoshop. Moreover, the copy can accidentally end up with the wrong person, creating an additional possibility for (identity) fraud.
- A person's access to a bank account cannot be checked.
- The solution requires an extra action from the customer during onboarding, which negatively affects customer journey.
- For a company, there is a lot of manual work, error proneness and additional costs.
2. The seller transfers one cent to the buyer via iDEAL.
A token iDEAL payment of one cent can be used to verify that someone has access to the payment account, and that the ascription matches.
- The one-cent transaction via iDEAL is easily recognised.
- The transaction costs the customer only one euro cent.
- DNB and AFM have indicated that operators are allowed to remotely identify their customers in this way.
- Criminals are also familiar with this method and are now abusing it.
- A (manual) reconciliation is needed to match the iDEAL transfer with the person.
- If the transaction was made from an and/or account, it is impossible to determine who transferred the euro cent.
- The business itself incurs more than 1 cent transaction costs to use iDeal. it is common for this to be between 15 and 30 cents on average.
3. IBAN-Name Check
With the IBAN-Name Check, you can check if there are discrepancies between the name provided by the seller and the name recorded by the bank as the account holder.
- It allows you to identify discrepancies even while registering new customers or making administrative changes online.
- Business payments are usually made in batches and, as yet, banks do not indicate when there is a mismatch between the ascription and the account number. So it is important to re-check whether the name and bank account match every time a payment is made or data is changed. With the check, you will not only see if name and account number match, you will also see if the account is active, if the account is used privately or for business and how many account holders are registered. The IBAN-Name Check can be integrated into the CRM.
- Technical knowledge is required to integrate the IBAN-Name Check into the CRM.
- There is a small fee per IBAN-Name Check.
How big the problem of invoice fraud and wrong transfers is at the moment is not exactly known. The Dutch Payments Association once calculated that 1,300 incorrect transactions are reported every month, undoubtedly only a fraction of the actual number. The result is that companies see part of their working capital disappear and possibly suffer reputational damage.
The IBAN-Name Check was developed by SurePay, with the aim of making payments more secure. Since this effective service has been implemented at banks, the number of related reports of invoice fraud has fallen by 81 per cent, and the number of incorrect transactions has been halved. The IBAN-Name Check has already issued 35,923,805 fraud alerts in the past year.
Want to know more about the IBAN-Name Check? Schedule an appointment with Rob Weerts (Business Development Manager) via the button below or download the brochure.