Invoice Manipulation in TBML - Key Highlights
Invoice manipulation is a trade-based money laundering (TBML) technique that involves modifying, falsifying, or misrepresenting the invoice price, quality, or quantity. Criminals use these tactics to move illicit funds and make their illegal money look legitimate. This promotes VAT/GST fraud, illicit value transfer, and procurement fraud.
The most common forms of invoice manipulation include over-invoicing, which means inflating the goods or services value on the invoice, whereas under-invoicing means lowering the price below the market value.
Duplicate or multiple invoicing means a bill is processed more than once for a single transaction. On the other hand, a ghost invoice means a fake bill generated for a transaction that never happened.
Banks, payment firms, FinTechs, and trade finance companies must implement strong controls to identify and report suspicious activities related to invoice manipulation to prevent ML/TF.
Some of the common red flags, data indicators and patterns include the following:
FATF emphasises a risk-based approach to combat trade-based money laundering (TBML). The regulatory body expects Covered Entities to identify the red flags and inconsistencies in documents. Further, entities must perform KYC, Enhanced Due Diligence and validate the documents appropriately to comply with AML/CFT laws.
Regulated Entities must assess risks for counterparties and transactions involved in international trade. Further, entities should use tools or structured methods that ensure transparent and compliant operations while evaluating anomalies and calculating risk scores.
Additionally, clear audit trails ensure accountability and transparency within operations, while defined escalation processes ensure timely addressing, resolving and reporting TBML cases.
RapidAML facilitates the examination of invoice data by extracting the pricing information and validating it against the historical baselines. The software incorporates advanced artificial intelligence that detects anomalies and identifies suspicious supplier patterns and pricing irregularities.
RapidAML performs KYC checks and screening to detect shell companies, third parties and identify hidden UBOs associated with the transactions. The software’s transaction monitoring and screening solutions support proactive risk analysis. Further, through effective case management, RapidAML automates workflows, enabling faster reviews and quicker process escalations for regulatory reporting.
Common types of invoice manipulation in TBML include over-invoicing, under-invoicing, multiple invoicing and misrepresentation of goods and services.
Using effective AML software, invoice manipulation detection becomes easier. Truly, with advanced AI and ML, the system detects unusual trade patterns and deviations in customer behaviour.
Industries with complex supply chains, global vendor networks, high volume transactions, decentralised purchasing, low-value transactions, and fewer formal controls are most likely exposed to invoice manipulation.
Banks use advanced automated software, such as RapidAML, to verify vendor information, transaction details, and data consistency for ensuring the authenticity of invoices.
Yes, AI with behavioural analytics and advanced pattern recognition algorithms automatically validates data, evolving suspicious patterns, and finds anomalies in invoices, providing accurate results to reduce false positives.
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