It sounds like any fast-growing company’s dream: a sales agent hired to win new overseas business – hardly a simple task – seems to hit the ground running and nail the numbers, despite a few quirky working habits.

But then what look like the spoils of diligent hard work transpires to be no more than a mirage, as the agent is exposed as a fraud.

Such is the recent experience of Brewdog. In a September LinkedIn post, Founder and CEO James Watt opened up about a rogue employee who had flown out of the starting gates in a key foreign market, racking up new distribution points, beer deals with famous music festivals and close ties with online influencers.

Unusually, the sales agent had insisted on working alone, refusing to be accompanied to meetings by other Brewdog staff. However, Watt wrote: “The results were so good that our team in that country decided to accept her operational idiosyncrasies and she produced signed purchase orders on emails from the relevant customers she had sold to, which quickly dispelled any doubts over her effectiveness.”

That relief was short lived.

Subtle mimicry

Alarm bells rang when the head of sales for the target country met up with two of the influencers to whom the agent was ostensibly sending monthly samples – and found they had received zero merchandise. From then on, the scam “unravelled quickly”, Watt wrote.

“We discovered fake emails, faked meetings, forged purchase orders,” he explained. “They had even gone to the trouble of setting up fake email addresses, which subtly mimicked the actual email addresses of real customers.”

For example, instead of sending the purchase orders to Brewdog HQ from the real email address – which would have been, say, ‘buyer@supermarket.com’ – the agent had set up and used ‘buyer@super-market.com’ instead.

“When we spoke to the customers she had produced the purchase orders from,” Watt added, “they told us that they had never even heard of this person.”

Right before the point of exposure, Brewdog had been poised to send 100,000 cans of beer to a fake customer dreamt up by the rogue agent.

Pain points

With its faked purchase orders and customer details, the Brewdog fraud has stern lessons for professionals working across the procurement process – and on both sides of the bargain. What if an employee within your business is carrying out such actions? And what if you are a customer who is dealing with a bad-faith individual at one of your suppliers?

Indeed, Brewdog’s rogue-agent case combines key elements of procurement, payments and invoice fraud.

In research last October, the UK arm of accounts payable automation specialists Medius found that one in five finance professionals is unaware – or unable even to estimate – the cost of invoice-related fraud to their business. Citing “messy paper trails” as a hindrance, the company put the average cost of UK invoice fraud at £295,000 per business, per year.

For Medius UK Director Paul Ellis, Watt’s account serves as the latest reminder that no company is safe from payments fraud.

Ellis points out that while Brewdog was able to identify the source of its irregularities before sending out 100,000 cans, it is a “sad truth” that many finance professionals and business chiefs “remain largely unaware of the pain points in their companies, which leaves them at particularly high risk of being defrauded”.

Gary Hemming, Commercial Lending Director at ABC Finance, says it is vital for finance teams to set up a comprehensive strategy to crack down on this type of fraud.

“First and foremost, implementing a robust invoice verification process is crucial. This should involve thorough cross-referencing of invoices with purchase orders and delivery receipts to ensure consistency and accuracy. Designate specific individuals or teams to take responsibility for verifying invoices, and consider using automated invoice processing software to detect anomalies and inconsistencies,” Hemming says.

Ongoing vigilance

“Segregating duties among employees who create purchase orders, receive goods, approve invoices and make payments reduces the risk of collusion and fraud. Open communication with suppliers is crucial: confirm any changes in banking details through a trusted, independent channel to avoid fraudulent requests,” Hemming adds.

As well as covering key procedural points, an effective anti-fraud policy should make room for employees to raise concerns about any unusual activities they may have witnessed, Hemming stresses.

“Implement a whistleblower policy to allow staff to report suspicious activities confidentially and without fear of retaliation,” he says. “Conduct internal and external audits to detect and prevent fraudulent activities, using data analytics to identify irregularities. Consult with legal counsel if fraud is suspected or detected, and explore insurance coverage options for fraud-related losses.”

Jack Macfarlane is Founder and CEO at procurement automation platform DeepStream. Detecting fraud “requires ongoing vigilance and continuous monitoring, coupled with a comprehensive understanding of each employee’s role – plus a thorough vetting process for those involved in the company’s financial department,” he says.

On the buy side, Macfarlane says key warning signs to look out for in a vendor include:

• unusually inflated prices;

• a single person overseeing the entire transaction from start to finish – a red flag that resonates with the lone wolf approach of Brewdog’s fraudster;

• limited to non-existent availability of the vendor’s history;

• any listing on an invoice of a company with a strange or unusual address, and

• threat tactics employed in the chasing of monies, designed to elicit kneejerk payment before the buyer can carry out proper due diligence – for example, a notification that the due date is expiring now, or that the buyer’s credit rating is in jeopardy if payment isn’t made immediately.

“Keeping all members of the finance team comprehensively trained and educated on invoicing and financing procedures, alongside training members to be aware of discrepancies and red flags to quickly spot suspicious activity, is of huge importance,” Macfarlane says.

“Regularly reviewing invoices can help lead to an effective and clear documentation process where inconsistencies and errors are detected at the earliest opportunity,” he adds. “If red flags are detected, an internal and external investigation must be carried out, reviewing all relevant financials and suspicious vendors or employees.”