How does a fraudulent invoice kickback scheme operate?

A fraudulent invoice kickback scheme operates primarily by inflating invoices through collusion. In this type of scheme, a fraudster collaborates with an outside vendor or supplier to create fake or inflated invoices for goods or services that may not have been delivered or that are overpriced.

The process often involves:

1. Collusion: The perpetrator and the vendor agree to a scheme where the vendor issues inflated invoices. This collusion may also include a kickback to the employee from the supposed vendor as a reward for facilitating the fraud.

2. Inflation of Invoice Amounts: The invoices presented for payment are deliberately inflated beyond the actual value of the goods or services provided, allowing the fraudster to receive more funds than they are entitled to.

3. Payment Processing: Once the invoices are inflated and submitted, the payment is often approved and processed without sufficient verification due to the trust placed in the vendor by the organization or the lack of appropriate oversight.

This method can lead to financial losses for the organization and often goes unnoticed until an internal review or audit takes place. By recognizing how collusion plays a crucial role in the inflation of invoices, organizations can better understand and address the risk of such schemes within their internal controls and vendor relationships