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By Laurent Charpentier, CEO, Yooz
Even those who aren’t die-hard fans of Marvel Comics have heard of the superhero Iron Man, a role Robert Downey Jr brought to the big screen and arguably made him an icon. Downey’s character, self-serving tech inventor Tony Stark, transformed himself into a hero, opting to apply his technology for the greater good instead of personal gain. Essentially, he turned a means for evil and corruption against itself into a force for good.
In today’s world of finance, we’re witnessing our own perpetual technology transformation, some of it good, some not-so-good. Take corporate finance processing, such as accounts payable (AP), for example. We’ve worked for decades to detect and thwart ever-more-sophisticated payment fraud schemes, but now there’s a darker threat: AI-powered fraud, a fast-evolving, artificial intelligence-driven weapon bent on exploiting our accounting systems for its master’s gain.
How do our finance teams defend against fraud attempts that seemingly adapt faster than we can possibly counter them? The answer may well be to fight fire with fire.
How AI-driven fraud can compromise your payment process
Despite much apprehension about this new technology, AI isn’t inherently “evil.” Like Tony Stark’s inventions, unfortunately, the raw power of AI was unleashed without fully considering its potential for misuse.
Technology can be a double-edged sword, and AI is no exception. For all its positive uses, AI’s ability to learn and mimic legitimate financial processes means fraudsters can use it to commit payment fraud, for example, in several ways.
AI systems can be trained to generate fraudulent invoices that appear quite authentic, mimicking the formatting, language, and even the usual amounts of legitimate invoices from genuine vendors. By analyzing patterns in payment processes and schedules, AI algorithms can predict the best timing and methods for sending fraudulent payment instructions — just when the AP team is expecting an invoice — increasing the chances the team will follow those instructions.
Using image and document processing, AI could convincingly forge financial documents and signatures, making it difficult to distinguish between genuine and fraudulent documents. Worse, AI can use deep learning to analyze legitimate vendors’ data and communication patterns, then invent fictional (yet compelling) new vendors with accounts and invoices. Either way, unsuspecting AP teams can mistakenly send payments to fraudulent accounts for goods or services they never received or even ordered.
Even companies employing anomaly detection systems are at risk, as AI can decipher how their algorithms work and devise transactions that confound them.
Finally, these fraudsters can use AI to analyze vast amounts of data from social media, company websites, and other sources to identify new targets, such as those with less sophisticated AP systems. They might also identify individuals to target within a company and then use AI-powered bots to conduct social engineering attacks that manipulate them into making unauthorized payments. These bots can learn from successful scams, refining their approach to become more effective over time. Is no organization safe?
Fighting fire with fire in the war on AP
As the reality of AI-assisted payment fraud emerges and strikes at the heart of financial operations, the call to action becomes clear. Businesses must decide the path forward. Will they remain passive (and vulnerable), or will they, like Stark, pivot towards using their greatest asset to defend themselves?
To combat AI-driven fraud tactics like these — and indeed to survive financially — businesses must don their metaphorical Iron Man suits, developing AI-enabled systems and tools that can perform automated functions like these:
Anomaly detection is still at the heart of the fight, including detection of duplicate invoices, unusual payment amounts, or payments to new vendors that haven’t undergone the usual vetting process. But by augmenting these systems with AI algorithms, they can adapt in real-time to the continually changing, ever-more-sophisticated schemes today’s fraudsters are devising.
Automated verification of invoices and payments using AI algorithms to cross-reference them against purchase orders, delivery receipts, and vendor contracts ensures that payments are legitimate and authorized.
Advanced data analysis and predictive analytics allow AI to analyze historical data to identify trends and patterns associated with fraudulent activity, allowing businesses to mitigate fraud risks. [CM1] [HK2]
Vendor risk assessment can leverage AI to assist with in-depth risk assessments of vendors by analyzing their historical data, social media presence, credit history, and more.
Natural language processing (NLP) powered by AI can scrutinize the text in invoices and communications for signs of phishing or other human-focused fraud attempts, reducing reliance on employees to identify them.
Continuous improvement uses AI and machine learning (ML) algorithms to learn from past fraud incidents, improving their detection capabilities and adapting them to evolving fraud tactics.
When enhanced by AI, all these capabilities enable AP teams to battle today’s AI-powered fraudsters more effectively, but the last item may be the most crucial of all. Just as Iron Man must continuously upgrade his armor to thwart new foes, AI systems must learn, adapt, and evolve if they continue to protect the financial integrity of the businesses that count on them.
The battle is never-ending, but so are our options to win it
The dynamic of using AI technologies to both perpetrate and prevent accounts payable fraud presents a modern “arms race” scenario, where advancements in AI technology can be harnessed for both malice and good. There will always be those who attempt to perpetrate fraud, and AI will continue presenting them with new ways to mount their attacks.
However, AI also presents finance teams with the opportunities to repel those attacks effectively. This dual-edged nature of AI underscores a continuous battle of escalation between fraudsters and those tasked with safeguarding financial systems.
In the end, “AI vs. AI” is not just a tale of “technological warfare.” It’s a story of redemption, innovation, and the relentless pursuit of integrity in the digital age. Much like Iron Man’s legacy, it inspires businesses to rise to the occasion, leveraging AI not just for profit but for the protection and betterment of all.
About the Author
Laurent Charpentier is the Chief Executive Officer of Yooz, a cloud-based E-invoicing and Purchase-to-Pay (P2P) automation solution. Formerly, since 2016, he was Yooz NORAM COO and CIO and became Yooz CEO in 2022 to lead the future growth of the company. A graduate of the Massachusetts Institute of Technology and INSA Lyon, Laurent previously worked as Solutions Lead Architect and Lead Consultant for Accenture and a Business Analyst at Dell Inc.
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