Supply chains are constantly being threatened, but not always from the direction you might expect. While cargo theft is a $12 billion problem for U.S. companies, according to the International Cargo Security Council, internal theft accounts for a hefty chunk of those stolen goods.
"Fraud thrives on complexity and companies are facing fraud from the very beginning, on every single factor: raw materials, production and delivery," says Richard Abbey, a managing director at risk consulting firm Kroll. "Today's supply chains are a multifaceted, complex web of relationships and processes that often spans a number of continents as companies become larger and more global in scope."
Through their experiences helping companies to investigate internal fraud issues in the supply chain, particularly in logistics and transportation, Kroll experts have identified the following red flags:
Abnormal selection of vendors. When a single individual selects service providers, related, controllable or illicit players can be chosen.
Payments outside the normal accounts system. Be warned if payments are hand delivered, approved manually or not accompanied by a proof of delivery.
Unusual payment patterns. Falsified invoices rarely follow the same patterns that come from honest suppliers. Watch for an increase in payments to one vendor, a high number of transactions under audit thresholds or multiple invoices on the same day.
Rates paid are out of line with the company's standing in the market. It is difficult for a carrier that earns a fair profit to distribute part of their revenues in kickbacks or illicit payments, so their charges may be higher.
Unexplained lifestyle improvement. Luxury cars, trips or vacations with suppliers, and purchases of real estate may all point to a problem.
Complaints or tips. Corrupt staff members try to get rid of non-conformers, exclude them from the "in crowd" and marginalize complaints from co-workers.
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