Page 14 - CMA Journal (Jul-Aug 2026)

Focus Section

A r t ic les S ec t ion

Learning What is Not Normal Connecting Physical Goods with Financial Th
The Future of Fraud Prevention Machine learning can identify unusual behavior even if Transactions co
be
the exact fraud pattern has never been recorded
The Blockchain and IoT can together e ectively
in Procurement before. Traditional systems normally depend on prevent ghost transactions and issuance of fake s
Th
prede ned rules such as agging the transactions
invoices. For example, a seller dispatches 10,000
above a certain amount. The fraudsters can meters of fabric to a garment factory. Suppose, the
immediately learn these rules and make plans to goods were never delivered to the factory. The C
Introduction Tree: asset circumvents them. Unsupervised ML can learn documents like purchase order, delivery challan,
misappropriation and abnormal behavior and identify deviations from the inward gate pass and invoices were fake because of
Corporate fraud is often associated with sophisticated corruption. normal pattern. This is highly useful when methods of be
cyberattacks, data breaches, and hackers in ltrating fraud are changing and evolving. For example, Master relevant persons colluded. gi
organizational systems. While cyberfraud can pose One of the most are always below the approval limits. Accounts The accounting system might have recorded the in
serious and potentially devastating risks to businesses, common forms of asset card, a global payment network uses AI, ML and Department pays immediately. Moreover, the purchase of goods even though these were never ea
procurement fraud remains one of the most prevalent misappropriation is a anomaly detection software to identify transactions supplier's registration records are linked to another delivered. em
forms of corporate fraud. According to the global billing scheme. Under which deviate from normal customer behavior. Since employee's personal business entity. Although, all ob
survey ndings published in the ACCA Policy & Insights this scheme, a business anomaly detection does not rely only on previously these events seem harmless in isolation. But, an AI However, if the IoT have been employed, the digital
report, “Combatting Fraud in a Perfect Storm,” is deceived to make marked fraud examples, it can identify new fraud system can analyze the hidden relationships and nd mirror of the physical movement of the goods would
procurement fraud has a 34% global prevalence rate payments for patterns which never happened before. out the fraud scheme. have been recorded automatically. Additionally, t
and a 35% materiality rating, highlighting its unprovided services or Natural Language Processing: Reading Between blockchain could have saved the information in a
signi cant impact on organizations. unsupplied goods. Mumtaz Hassan, FCMA the Lines Blockchain and IoT: Building a Trusted tamper-resistant record. This record can be veri e
Procurement fraud can occur at various stages of the Normally, the ghost Financial Controller The clue for fraud is not merely hidden in numbers. Supply Chain with the physical record and in case of tampering,
fraud would be detected.
Nishat Mills Limited
purchasing and supply chain process, from supplier vendors or shell This can be found out in emails, letters, agreements Businesses have become complex. A transaction wh
selection and tendering to contracting, invoicing, and companies are used to execute such schemes. Another and other written communications. Natural Language normally involves many employees from multiple Creating a Culture of Integrity wh
payment. Given that procurement is fundamental to way is using the Company’s credit card or purchasing Processing (NLP) can help to detect fraud in these locations interacting with various suppliers while The role of technology is very important in prevent
acquiring the goods and services required for channel to buy items for personal use. sources. NLP can be used to analyze large amounts of engaging outsourced logistics. This is also done fraud, still the human factor cannot be ignored in
day-to-day operations, weaknesses in procurement The corruption is the second most important category. unstructured data to identify unusual words, themes, through scores of digital systems. It makes traditional detection. The businesses should promote the cultur
controls can expose organizations to nancial losses, According to the ACFE, corruption occurs when an security systems unreliable. Therefore, the businesses of ethics and integrity among employees. Th
reputational damage, operational disruptions, and patterns and relationship e.g. unclear and evasive have to install checks on devices, individuals and of
regulatory risks. Consequently, strengthening employee abuses his position or in uence for personal words such as “usually”, “normally”, "perhaps", systems along the way as transaction or event Shared Accountability ne
procurement governance, transparency, internal bene t, in breach of his duty. In procurement, this "generally". These words may provide a sign that the proceeds. Blockchain and Internet of Things (IoT) are Accounts, IT and Internal Audit cannot solely be he
controls, and oversight is essential for organizations often involves manipulating the supplier selection person communicating about a transaction is trying to helpful and create a “digital mirror” of what is taking responsible for fraud prevention. Since fraud can
seeking to safeguard resources and maintain integrity process through practices such as bid-rigging and mislead. This may not detect a fraud but provide a lead place physically. happen anywhere in the organization, fraud detectio
throughout their supply chains. kickbacks. to a suspicious scheme. The American Securities and and prevention are the shared responsibility of c
Understanding the Procurement Fraud Why Procurement Fraud is Hard to Exchange Commission (SEC) has realized the Creating a Digital Mirror of Physical Operations procurement, operations, IT, accounts, internal
importance of language and uses an NLP software
co
The Blockchain and IoT are used to capture information
Procurement fraud is an occupational crime. Detect? which is designed to read between the lines for about goods as these are moved through the supply etc. These functions must regularly communicate and
share information about possible fraud risks. It is
Association of Certi ed Fraud Examiners (ACFE) Unlike a cyberattack, which can trigger sudden detecting the probability of fraud in the chain. For example, if a transporter installs telematics di
de nes occupational fraud as the use of one’s security alarms, procurement fraud is often di cult to communication of executives of the companies. devices or trackers in his trucks, he can have noting that fraud normally happens where systems
occupation for personal enrichment through the detect because it is designed to look normal. In Fraud AI and Machine Learning: The New already been processed. On the other hand, an AI From Finding Fraud to Connecting the Dots timestamped record of the location, and movement. and work of di erent departments meet with each B
deliberate misuse or misapplication of the employing Analytics Using Descriptive, Predictive, and Social system can continuously analyze large volumes of This can be used to trace the goods. It may also be used other. In fact, these are fraud detection points;
organization’s resources. Procurement fraud generally Network Techniques by Bart Baesens, Véronique Van Smoke Alarm transactions in real-time processing. It helps to identify AI’s strength is not limited to nding an instance of to review a claim of a disgruntled client in case of a therefore, communication among these departments
falls into two main categories under the ACFE Fraud Vlasselaer, and Wouter Verbeke, this As discussed above, a procurement fraud can blend unusual patterns on the go. The unusual transaction fraud in isolation such as in a single transaction or a dispute about the delivery of goods happens. is vital. pe

behavior is compared with the camou age into normal business activities which makes it hard to times, repeated round-number transaction or other single account. It can connect many signals, which is Su
Figure 1: ACFE’s Occupational fraud and techniques used by animals such as detect. Moreover, in this age of information abnormal patterns can easily be identi ed and agged. necessary, because modern fraud schemes depend on Blockchain: Creating a Shared Version of the Truth cr
abuse classi cation system (The Fraud Tree) chameleons and stick insects. Abdelrahim technology millions of transactions can take place at For example, Accenture has integrated an relationships between people, device, and accounts. While IoT is helpful in knowing what is happening of
Al Aqqad, in Fraud Analytics in Action, also very high speed without the use of a single piece of unsupervised AI-based anomaly detection model into Therefore, an important analytical shift has happened physically, blockchain makes it possible to record and or
discusses this “camou age e ect.” paper making human supervision di cult. Therefore, its corporate expense reporting system. This solution from simply " nding fraud" to "connecting the dots" save this information digitally in Trustworthy way. A aw
Fraud Tree Fraudsters deliberately imitate normal businesses need tools that can sense small signs that continuously screens 100% of expenses to isolate through arti cial intelligence and Social Network shared blockchain ledger can be used to record or
business behavior so that their actions humans may overlook. In this regard, Arti cial statistical outliers i.e. unusual expense claims and Analysis (SNA). The complex entities and their information collected by sensors of IoT. The entries in as
blend in with legitimate employees and Intelligence (AI) and Machine Learning (ML) can play hidden patterns of non-compliance. This system has interactions are modelled as network graphs through the blockchain ledger cannot be changed without
routine transactions. The gure 2 provides a an important role. signi cantly reduced the auditors’ time and enabled SNA which shifts the analytical lens from individual authorization after these are properly recorded and
Asset Financial Statement brief snapshot of the procurement cycle Detecting Anomalies in Real-Time them to utilize it for investigating the suspicious behaviors to overall relational structures. For example, validated. This highly reliable record can be shared
Misappropriation Corruption Fraud along with potentially fraudulent activities transactions agged by the AI. a procurement manager again and again awards with con dence among buyers, suppliers, transporters
that look business as usual. Under a traditional audit a sample of invoices and contracts to the same supplier. The supplier's invoices or any other party.
transactions is checked and veri ed after these have

12 ICMA’s Chartered Management Accountant, Jul-Aug 2026