Learn how you can fight vendor fraud with Fraud.net’s award-winning AI risk management platform.

The COVID-19 pandemic created a sudden, rapid acceleration toward digital transformation. These dramatic changes to the work environment required new approaches and resulted in sudden demand shifts to accommodate change. As a result, organizations suddenly developed relationships with brand new vendors. Out of desperation to continue business operations, they signed on with any vendor that could supply the needed goods and services. 

Prior to the pandemic, the typical supplier onboarding process included on-site visits and in-person meetings. This process generally eliminated the introduction of fraudulent vendors to an organization’s portfolio of third-party goods and services. As companies canceled on-site visits and meetings became virtual, these rapid changes provided many opportunities for supply chain threats due to supplier fraud. 

These factors have driven the need for effective procurement risk management across all industries. It is vital to adopt a formal Know-Your-Vendor (KYV) program to conduct vendor onboarding safely and reduce your organization’s vendor fraud risk. 

Conventional Know Your Vendor Approaches 

Similar to how KYC verifies a customer’s identity, KYV verifies a vendor or institution’s identification, typically by verifying tax identification numbers and screening against sanction lists.

The most common means of implementing and managing a KYV program is a manual process. This typically involves onboarding vendors, managing spreadsheets for tracking, manually completing individual applications, and creating repositories of vendor information. As far as the onboarding process is concerned, this is generally a basic questionnaire that the vendor must complete. 

Unfortunately, this does not provide an effective means of screening and detecting potential vendor fraud. At this stage, a lack of due diligence almost certainly guarantees that vendor fraud can and will take place. Intense supply chain pressure during the pandemic has led many organizations to be less rigorous about how they vet their vendors. 

This pressure to meet deadlines and keep up with demand puts them at risk of dishonest vendors causing financial and reputational harm. 

What Can I do Differently? 

Fortunately, advances in technology used in KYV programs offer some benefits. Integrated technology solutions can help enhance due diligence and do not require inordinate amounts of time and information or manual efforts. 

Most organizational procurement teams do not have artificial intelligence (AI) or machine learning (ML) tools for advanced analytics. Without the ability to make data-driven decisions, effective risk management can be complicated. 

Worse, isolated data and legacy management systems were not designed with complex procurement functions in mind. Ultimately, this paradigm shift will make or break an organization with regard to supplier fraud. 

The Right Solution to Fight Vendor Fraud

The best starting place for your Know Your Vendor program is to strengthen and formalize your supplier onboarding process. 

At Fraud.net, our modern approach to KYV applies many of the same procedures used in our KYC solution for due diligence, but for vendor onboarding. Our effective KYV framework is founded on a more disciplined, data-driven type of risk analysis. 

Leveraging Application AI, our solution seamlessly integrates with a variety of platforms offered by specialized providers. It empowers your organization to gain insight using the data-driven approach required to fight vendor fraud. 

Does your organization need to verify bank account and address information? Our integrations with DIRO provide that. What about Tax Identification Number (TIN) verification? The TINCheck application can verify any vendor’s TIN in seconds. When using manual search tools to reconcile TINs, there is often a lack of company matches. This can be a significant liability for your company when validating a vendor. 

With our KYV solution, this is no longer an issue. We also host several tools that you can use to conduct various reviews throughout each phase of engagement between suppliers and your business. Using these tools, you can validate the identity and legitimacy of new potential vendors before you begin the vendor onboarding process.

To learn more about how you can prevent vendor fraud with our Know-Your-Vendor solution, download our eBook.