Invoice Fraud: Red Flags and Bank Evidence

What Invoice Fraud Covers

Invoice fraud covers bills for supplies that never existed, genuine bills with substituted bank details and inflated bills supported by a colluding supplier. Each form changes the evidence you need and the parties you investigate for recovery.

Form	What the business pays for	Recovery enquiry
Fake invoice	Goods or services never ordered or supplied	Identify the sender and recipient account holder, then establish who controlled the money.
Altered invoice	A genuine supply paid into a substituted account	Trace the diverted payment and establish how the instructions changed. Assess any dispute over discharge of the supplier’s debt separately.
Inflated invoice	A real supply with dishonest excess charges	Compare the contract and delivery evidence with the amount paid. Examine the supplier’s benefit and any payments to a colluding person.

An outsider’s fake invoice can copy a genuine supplier’s Australian Business Number (ABN) and use a near-identical name. In an illustrative scheme, the amount sits just below the business’s approval limit. The accounts team recognises the format and releases payment without finding a purchase order.

Criminal charges depend on the conduct and jurisdiction. New South Wales has fraud under section 192E of the Crimes Act 1900. In Victoria, section 82 of the Crimes Act 1958 addresses obtaining financial advantage by deception. Queensland’s Criminal Code contains fraud under section 408C. Commonwealth deception offences under Division 134 require the relevant Commonwealth connection, including a Commonwealth entity as the victim under section 134.2.

The NSW Judicial Commission’s fraud guidance explains the separate requirements of deception and dishonesty. Victoria’s Crimes Act and the Commonwealth Criminal Code set out their respective offences. Invoice fraud punishment depends on the charge, jurisdiction and sentencing facts. A suspicious payment alone does not establish those criminal elements.

Red Flags on the Invoice

An invoice needs further investigation when its supplier identity, tax treatment or payment instructions conflict with established records. Compare it with the supplier file and earlier invoices before relying on its appearance.

Search the ABN on ABN Lookup. Compare the entity name and registered business names with the invoice. A trading name can differ from the legal entity name, so establish the relationship before treating a mismatch as false invoicing.

ABN Lookup also shows Goods and Services Tax (GST) registration. If the invoice charges GST but the supplier’s registration does not cover the supply period, ask for an explanation and supporting records. An active ABN alone does not establish GST registration. The Australian Taxation Office’s GST guidance explains registration and charging GST.

Compare BSB and account numbers character by character with earlier paid invoices. A genuine logo and copied ABN can sit above a fraudulent account number. An unfamiliar account needs independent confirmation even when every other invoice field matches.

Invoice numbering also helps test the supplier’s claimed trading history. If every invoice your client receives is consecutively numbered, ask whether the supplier has other customers or uses customer-specific numbering. That sequence can suggest your client is the only customer. It needs an explanation, not an automatic fraud finding.

Red Flags in the Payment Trail

The first payment to a changed account number identifies the transaction to investigate when the real supplier later reports arrears. Build the sequence from the last confirmed genuine payment to the disputed payment and the supplier’s complaint.

Australian BSB-and-account-number payments have historically been routed using those numeric identifiers. Entering a supplier’s name did not ensure that the receiving account belonged to that supplier. CommBank’s electronic banking terms distinguish account-name information from payment processing instructions.

Confirmation of Payee now adds a name check at participating Australian banks. Australian Payments Plus explains that the service compares the entered name and account details with the receiving bank’s records. The Australian Banking Association confirms its availability at participating banks. Availability depends on the bank and payment channel. A match result does not establish that the invoice describes a real supply.

In a hypothetical matter, earlier invoices go to account A. An altered invoice directs $24,000 to account B, and the supplier later chases $24,000. The first debit to B dates the suspected diversion. Obtain the payment confirmation if the statement description omits the destination details.

Altered instructions can arrive through compromised email. The separate guide to business email compromise explains that delivery mechanism.

Tracing a Redirected Invoice Payment

Trace an invoice payment from the business’s debit to the recipient credit, then follow each supported onward movement. Start recovery enquiries before waiting for the complete transaction analysis.

1. Preserve the paid invoice, original electronic message and supplier-change records. Export the payment confirmation and retain the original bank statement showing the debit.
2. Identify the receiving bank from the destination BSB. Record the account number, amount and payment reference beside the source statement page.
3. Ask the paying bank’s fraud team to contact the receiving bank and request a recall. Record the request and response. Recovery depends on the funds and the banks’ response.
4. Obtain recipient account records through the legal process available in the matter. In proceedings, a properly issued subpoena can seek relevant statements and account-opening records. Scope and access depend on the court’s rules.
5. Match the recipient credit with the disputed debit. Follow subsequent debits into other accounts using recipient details, references and timing. Seek further records where the next destination needs proof.

The guide to subpoenaing bank records explains how to specify the records. Account-opening material helps identify the account holder. Separate evidence can be needed to establish who operated the account or benefited from the scheme.

For example, suppose account B receives the hypothetical $24,000 and transfers $18,000 to C while retaining $6,000. Statements for B establish the split. Records for C establish receipt and any later movements. If other money also moves through B, trace the transactions and balance before attributing the whole balance to your client’s payment.

FinTrace saves investigators and forensic accountants hours of statement conversion and review when a payment trail spans a large PDF bundle. We consolidate the supplied accounts into a searchable ledger and flag suspicious transfers in a clear findings report. Each finding cites its source PDF and page, putting the supporting evidence beside the analysis. The statement-analysis service costs a fraction of the cost of manual review for the same work.

Invoice Finance and Factoring Fraud

Invoice finance fraud occurs when a financier advances money against a receivable that is fictitious or already financed elsewhere. Match each advance to the underlying invoice and the customer’s actual payment.

Build a schedule showing the debtor, invoice number and face value. Add each financier’s advance and the account receiving it. Then match customer receipts and repayments against that same invoice. Different references or a second invoice copy must not turn one receivable into two assets in the schedule.

In a hypothetical example, the same $40,000 invoice supports a $30,000 advance from each of two financiers. The customer makes one $40,000 payment. The records show $60,000 of advances against one receivable. The finance agreements and assignment records establish each financier’s rights.

A fictitious receivable requires a different check. Obtain the supposed customer’s confirmation, purchase order and evidence of delivery. A payment from the borrower’s own account disguised as a customer receipt can make the receivable appear genuine. Compare the originating account with the alleged customer before accepting that receipt as corroboration.

Preventing Invoice Fraud

Prevent invoice fraud by verifying the supply and supplier before releasing money, then reviewing where payments actually went. Assign each control to a person who can stop the payment.

• Confirm changed bank details by calling the supplier on a number already held in the supplier file. Record who confirmed the change and which account they confirmed.
• Match invoices to purchase orders and goods-received records. For services, obtain evidence that the contracted work was performed. Compare quantities and rates with the agreed terms to detect inflation.
• Separate supplier setup and bank-detail amendments from payment release. Give the payment approver access to the verification record and require independent approval of exceptions.
• Review bank-statement payees regularly for first payments to new accounts and repeated amounts. Match each exception to an approved invoice and an independently confirmed supplier account.

An early payee review can detect the first diverted payment before the next payment run repeats it. Resolve repeated amounts against the supply records, including any legitimate recurring bills.

Insider schemes within the same process belong to the guide to accounts payable fraud. Scamwatch recommends independently confirming changed payment details and contacting the bank immediately after a suspected loss. Report the scam to Scamwatch after taking those recovery steps. Preserve the disputed debit and its destination account so the investigation starts from the payment that left the business.