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Checks Dated on a Weekend

This algorithm identifies any check dated on a Saturday or Sunday, which would be considered a rarity in the business world.

Vendors with an Unusual Percentage of Cancelled Checks

Cancelled and returned checks do occur in the course of a normal Accounts Payable month.  What is more uncommon is a vendor with many cancelled checks or a regular pattern of cancelled checks.  Cancelled checks are usually legitimate transactions; however, a cancelled check can be returned to the wrong hands and re-written to the fraudster.  Below is a true story of how a clerk turned a returned check into a fraudulent one:

“An uncashed disbursement check was returned to an accounts payable clerk for disposition because she originated the invoice entry. The clerk put the check in her desk and forgot about it for several months. Upon cleaning her desk, she discovered the returned check. When she checked the paid history, she realized the supplier had returned the check when it was determined to be a duplicate payment of an invoice. She also noticed that the payee name had been printed slightly below “Payee” on the check. With a bit of effort she managed to align the check and insert her name above the original payee in a print similar to the original, along with an “or” designation following her name. The fraud was caught by an accounts payable auditor searching for duplicate payments and who was asked by the supplier to furnish proof of duplicate payments by providing copies of both cancelled checks. “

This algorithm identifies vendors with cancelled checks and ranks them by the percentage of invoices that are cancelled status, so that a vendor with 80% cancelled checks will show up at the top of the list.

Above Average Payments per Vendor

This algorithm identifies invoices that are way above average for a particular vendor.  Suppose a vendor normally has invoices ranging from $1,000 to $3,000; suddenly an invoice shows up for $25,000.  You may want to investigate this abnormality and can do so using this alert pattern.  The pattern flags any amount that is 2.5 standard deviations above the mean invoice amount, per vendor.

 

Duplicate Vendor Detection

This algorithm searches for duplicate vendors in your vendor file.  It searches by 4 different criteria:

1)       by address

2)       by tax ID (EIN)

3)       by bank routing number, if available

4)       by name

In addition to matching by the exact field, this algorithm uses intelligent fuzzy-matching logic to identify non-exact matches.  It will identify an accurate duplicate match on addresses that are similar (but not exact), tax ID’s that are similar (but not exact), and bank routing numbers that are similar (but not exact).

Vendor / Employee Cross Check

This algorithm compares a vendor with an employee four different ways, via:

• Address
• Tax ID Number
• Bank Routing Number
• Phone Number

 

Using this approach, the software was able to detect a real employee (“Kathy”) whose SSN was the same as a company EIN (tax ID number).  The company name, which we will call “ABC Inc”, happened to be on the same street, city, and state as a person with the same last name as the employee (presumably her spouse).  Without this pattern, the employee fraud may have gone undetected.

Vendors with P.O. Boxes

Many vendors have P.O. Boxes as their addresses, making it difficult to sift through potential fictitious vendors and legitimate ones.  However, this report can be used in conjunction with other reports.  For example, if a vendor shows up on the PO Box report and also the rounded-amount invoice alert report, this vendor may warrant further auditing.

Vendors with a Mail Drop as an Address

This algorithm compares vendor addresses with mail-box drop address such as “Mail Boxes, Etc”.  Some fraudsters will use mail drops as their address instead of a P.O. Box, to hide their fraudulent activity.  Craig Greene, a well-reputed CFE from Chicago, developed the mail-box drop table and helped formulate this algorithm.  Not all of the vendors appearing on this list will be fraudulent, because a vendor may in fact be right next to a Mail Boxes, Etc. company.  However, the list provides a unique approach to reviewing vendors who also may show up on another alert list.

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