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The Insider Threat: Manipulation and Abuse of Payment Control Measures

Updated: Aug 22, 2021

Do you have adequate financial control measures; Do you test your payment system for insider threats. It is the insider that recognises the compliance weaknesses in organisation procedures and the gaps in control measures, so do you use trust as a control measure, and are you willing to take the risk that your staff won't defraud your organisation?

Do not be deceived: bad company corrupts good morals


There are many ways in which an illicit payment can be hidden. Procurement corruption can take many forms where it has been agreed to facilitate the award of a contract, the bribe payment can happen before or at the time of award, can be given from the profits during the lifetime of the contract, that can include an agreed percentage of the contract value.


URGENT REQUIREMENTS

Do you consider how to prevent corruption in procurement? In organisations where there are consistent urgent requirements or short deadlines for goods, works or services to be provided it becomes much easier for individuals to request a bribe because there is always pressure on an organisation to relax the procurement controls and introduce direct award contracts rather than tender the work to speed up the process.


Individuals within an organisation that can influence the procurement process will always know where the gaps are in the controls regime and how to exploit it. Fraud and corruption becomes much easier where there is no documented contact with suppliers or new vendors, where there can be a lack of visibility of individuals contact, communication and relationship an and environment can be created where an individuals corrupt behaviour is hidden and where allegations are made about this behaviour there is limited ability to verify these suspicions or allegations.

ADVANCED PAYMENTS

In some regions globally, it appears to have become more common for organisations to use advanced payments for suppliers to expedite urgent requirements, that can on average amount to between 50 to 100 percent of the contract value. However, it has been noted that in many cases the procurement isn’t urgent and it has become custom and practice to use this method of payment with certain suppliers.


Where this method of procurement and payment is common there is an increased risk that a bribe payment could be requested, specifically incorporated into the advanced payment and handed out as cash by the supplier. The illicit payment is now hidden because of the procurement route used, the lack of information generated, and the method in which the payment is made. Does your organisation have the ability to verify that this work was even carried out?


Organisations that have a high volume of procurement and invoicing and have limited staff to manage these outputs can create a situation where checks and balances are missed or not carried out because of excessive workload.


CONTROL MEASURES

A very simple bribery method, however, this risk can be mitigated by the introduction of procurement controls and a risk management and compliance approach, specifically:

  • Does your organisation have a published single source procurement policy and procedure?

  • Do the procedures define the circumstances in which advance payments can be used?

  • Does your organisation have a single source justification procedure?

  • Are these procedures followed?

  • Use proactive data analysis to verify which companies regularly receive advanced payments. Are they justified or is there a pattern of non compliance with the policy?

  • Are these procedures audited for non compliance?


CONCLUSION

Although an organisation should have ethics and anti-bribery policies and procedures including a hotline that will allow suppliers the opportunity to report a bribe request, it is only when you introduce and follow procurement policy and procedures that you have a greater opportunity to mitigate bribery risk and introduce a more robust compliance program.


Does your leadership recognise the benefit of having trained procurement professionals, that the management and compliance of procurement procedures can never be underestimated to protect the revenues of an organisation. Do you think that introducing procurement procedures to make things simple or speedier will have a negative impact on your organisations bottom line.


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