The Procurement Glossary » Procurement Fraud

Procurement Fraud

Compliance & Risk

Definition

Dishonest activity to gain improperly from the buying process — such as kickbacks, phantom vendors or invoice fraud.

Explanation

Procurement fraud takes many forms: fake suppliers, colluding with vendors, inflated or duplicate invoices, and bid rigging. Controls, data analytics and segregation of duties are the main defences, alongside vendor due diligence.

Example

A phantom-vendor scheme is caught when analytics flag payments to a supplier with no PO or deliveries.

Related terms

• Internal Controls — The policies, procedures and system checks that safeguard assets, ensure accurate records and prevent fraud.
• Segregation of Duties (SoD) — A control principle that splits critical steps among different people so no one individual controls a whole transaction.
• Conflict of Interest — A situation where personal interests could improperly influence a procurement decision.
• Duplicate Payment — Paying the same invoice more than once, usually due to data errors, duplicate vendors or weak controls.

Frequently Asked Questions

What is Procurement Fraud?

Dishonest activity to gain improperly from the buying process — such as kickbacks, phantom vendors or invoice fraud. Procurement fraud takes many forms: fake suppliers, colluding with vendors, inflated or duplicate invoices, and bid rigging. Controls, data analytics and segregation of duties are the main defences, alongside vendor due diligence.

Can you give an example of Procurement Fraud?

A phantom-vendor scheme is caught when analytics flag payments to a supplier with no PO or deliveries.

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