Page 44 - CMA Journal (Jul-Aug 2026)

A r t ic les S ec t ion
Anti-Fraud Technologies in Procurement: How Data
and Automation Are Closing Longstanding Gaps
Due to limited resources, it is not possible for every companies established
organisation to produce everything independently. for such purposes may,
Resource constraints have therefore compelled upon investigation, be
organisations at the national, regional and global linked to an employee’s
levels to work together to ful l one another’s needs. address, bank account or
This may involve the supply of raw materials, high-tech other personal interests.
equipment and machinery, as well as services such as Other forms of
construction and consultancy. Procurement is the procurement fraud
process of identifying needs, searching for suppliers or include invoice fraud
vendors, and negotiating the prices and costs of goods and overbilling,
or services. While de nitions may vary slightly across undisclosed con icts of
sources, an e ective procurement process generally interest, splitting
incorporates a number of core operational steps. Muhammad Nawaz
purchases into smaller MS Scholar in Commerce
For any organisation, procurement represents one of transactions to Allama Iqbal Open University
the areas through which substantial amounts of circumvent approval
money can leave the organisation without immediate thresholds, and change-order abuse. In the latter case,
visibility. Audit professionals frequently identify a supplier may submit a low winning bid and
procurement as a high-risk area, not necessarily subsequently increase the contract value through
because procurement personnel are dishonest, but variations or additional work that was not subject to
because the process contains numerous discretionary the original competitive process. In practice,
points at which decisions can be manipulated without procurement fraud schemes may involve a
detection for extended periods. Procurement fraud combination of two or more of these methods
occurs when an individual deliberately manipulates operating simultaneously.
sourcing, tendering, contracting or payment processes
to obtain nancial or other bene ts dishonestly. The The Seven Common Types of Procurement Fraud
critical distinction between an error and procurement
fraud is intent: fraud involves knowingly circumventing 02 03 04
01
established rules or controls for an improper purpose. Bid Rigging & Kickbacks & Ghost / Shell Invoice Fraud &
Collusion Bribery Vendors Overbilling
How Procurement Fraud Happens
Procurement fraud generally occurs through several
recurring patterns, with bid rigging among the most 05 06 07
common. In bid rigging, competing vendors collude in Conflict of Split Purchasing Change -Order
Abuse
Interest
advance to determine who will win a tender.
Participants may take turns submitting losing bids so Figure 1: The seven fraud patterns that recur most often across procurement
that the group can maintain arti cially high prices audits worldwide.
while preserving the appearance of competition.
Another common form is kickbacks and bribery. In Why Procurement Fraud Continues to
such cases, an o cial directs a contract towards a
favoured vendor in exchange for a personal bene t. Occur
Such bene ts may be disguised as consulting fees, The recurrence of these fraud patterns across countries
employment opportunities or arrangements involving and industries can be understood through the
relatives or associates. well-established concept of the fraud triangle:
A third form involves ctitious vendors. Under this opportunity, pressure and rationalisation. Individuals
scheme, an organisation is invoiced for goods or may rationalise fraudulent behaviour by convincing
services that were never supplied or performed. Shell themselves that such conduct is acceptable because
others are doing the same.
42 ICMA’s Chartered Management Accountant, Jul-Aug 2026
The risk becomes more signi cant in procurement Similarly, Brazilian construction company Odebrecht
when individuals have control over substantial was involved in corruption across multiple countries
nancial resources and considerable decision-making
and ultimately paid substantial penalties and
authority. settlements. The Petrobras “Car Wash” scandal also
resulted in signi cant nancial losses associated with
In developing economies, reliance on manual
processes can further increase the opportunity for overpriced contracts. These cases demonstrate how
fraud. Physical les can be altered, removed or procurement fraud and corruption can become deeply
embedded in business operations when fraudulent
destroyed, while fragmented records may make it practices remain undetected for extended periods.
di cult to establish a complete audit trail.
What Traditional Controls Missed What Technology Is Doing Di erently
One of the most signi cant changes in modern
For decades, the primary tools for preventing and procurement is the shift towards continuous
detecting procurement fraud were largely manual and transaction monitoring. Instead of reviewing a sample
periodic. These included segregation of duties, of transactions periodically, automated systems can
post-transaction internal audits, policy checks, assess transactions as they occur and identify
reference checks and supplier blacklists. Such controls potentially unusual activity. For example, a system can
remain valuable and have successfully identi ed ag duplicate payments as soon as they are recorded.
numerous cases of procurement fraud. However, their
e ectiveness is limited by their reliance on sampling Arti cial intelligence and machine learning can take
and periodic review. this capability further by identifying deviations from
Sampling can detect only those transactions selected normal purchasing patterns across vendors, categories
for examination. A fraudulent scheme spread across and transactions. The systems can identify behaviours
hundreds or thousands of transactions may continue such as a vendor repeatedly submitting bids that are
for years without appearing in a sampled transaction. just high enough to lose while remaining part of a
Furthermore, when controls are applied primarily recurring bidding pattern, or purchases being
during an annual audit, the funds may already have deliberately divided to remain below approval
been transferred and the supporting documentation thresholds.
may have been altered or organised to conceal the Benford’s Law can also be used as an analytical
technique to identify unusual distributions of leading
underlying activity. digits in nancial data. When combined with modern
The nancial consequences of undetected anomaly-detection techniques and machine-learning
procurement-related corruption can be substantial. models, such methods can provide an additional layer
Between 2001 and 2007, Siemens paid more than $1.4 of analysis for identifying invoice batches or nancial
billion in bribes to secure contracts ranging from records that may warrant further investigation.
national identi cation systems in Argentina to metro
Strengthening Vendor Master Data
lines in Venezuela. Following its settlement with US
and German authorities in December 2008, Siemens Vendor master data is another important area where
paid approximately $1.6 billion in nes and technology can strengthen procurement controls.
disgorgement, making it one of the largest Foreign Automated systems can continuously screen vendors
Corrupt Practices Act sanctions on record. against relevant watchlists and other control
databases. Changes to vendor bank details can be
subjected to dual approval, while system-based access
controls can restrict who is authorised to create or
modify vendor records and payment information.
Blockchain and Record Integrity
Blockchain technology addresses procurement risks in
a di erent way. Once a record is entered into a properly
designed shared ledger, it becomes signi cantly more
di cult to alter it retrospectively without detection.
Such controls can reduce opportunities for fraudulent
backdating or unauthorised modi cation of
procurement records.
Connecting Data Across Systems of analysing each additional transaction can fall
Fraud schemes can also exploit gaps between di erent substantially.
In some cases, organisations may achieve a return on
organisational systems rather than weaknesses within
a single system. Cross-system AI can therefore provide investment within six to twelve months when avoided
losses and sta time savings are considered. However,
additional value by correlating information from email, successful implementation depends heavily on proper
enterprise resource planning (ERP) systems and
integration and con guration. Poorly tuned AI systems
operating on inaccurate or incomplete vendor data
can generate excessive false alerts and may ultimately
cost more than the losses they prevent.
Why Technology Matters More in
Developing Economies
The case for adopting anti-fraud technology becomes
particularly compelling in developing economies
where audit capacity may be limited relative to
payment platforms. This can help identify patterns that procurement volumes.
may remain invisible when each system is analysed
separately. South Asia provides several examples of digital
procurement at di erent stages of development.
The Impact of Anti-Fraud Technologies India’s Government e-Marketplace (GeM), launched in
2016, represents a relatively mature example.
According to Feedzai/Orbograph industry survey data, According to the available data, it connects more than
close to 40% of nancial institutions that had adopted 1.6 million buyers with over 2.3 million sellers. An
AI-based fraud detection reported reductions in losses independent World Bank evaluation found that buyers
of between 40% and 60%. Ukraine’s ProZorro achieved median price savings of approximately
procurement system, which combines transparency 9.75%. At the same time, India’s CAG has highlighted
mechanisms, blockchain-based record-keeping and the need for stronger benchmarking of GeM’s savings
AI-supported agging, has been credited with methodology, demonstrating that digitisation alone
generating substantial savings. Similarly, India’s does not automatically guarantee e ective oversight.
Comptroller and Auditor General (CAG) announced in
2026 that it was using AI tools and advanced data Bangladesh’s e-GP system has been operational since
analytics to scan public tenders, identify pricing 2011 and had moved most large tenders online by
2023. Pakistan has also expanded digital procurement
through the Public Procurement Regulatory
Authority’s Electronic Procurement System (EPADS).
During FY2024–25, EPADS reportedly processed
526,239 transactions worth Rs. 1.408 trillion and
generated administrative cost savings of Rs. 20.52
billion. The system has also been connected with
institutions including FBR, NADRA, SECP and PEC, with
oversight access for bodies such as the Auditor
General, NAB and the Competition Commission.
anomalies and detect potential bid rigging. These
developments indicate that advanced analytical tools
are increasingly being incorporated into public-sector
audit and procurement oversight.
The initial cost of technology can be higher than that of
traditional manual controls. Manual controls may
largely be incorporated into existing sta
responsibilities, whereas automated systems require
investment in software licences, ERP integration, data
cleansing and implementation. However, once
automated systems are operational, the marginal cost
For countries where internal audit teams are co
consistently outnumbered by procurement volumes,
ex
automated tools are increasingly becoming a necessi
rather than simply a modernisation initiative.
in
Technology can expand the coverage of audit and
monitoring functions without requiring organisation
to increase their audit workforce proportionately.
The Future of Anti-Fraud Procurement pr
mo
Despite the potential of these technologies, their
adoption should not be interpreted as an argument f
replacing human judgment with algorithms. ac
Presenting technology in such terms would overlook
important limitations associated with automated
decision-making. Ul
Research and practice concerning trustworthy AI i
public procurement continue to highlight the go
importance of e ective governance. If an AI model i
deployed without appropriate oversight, it may ex
incorrectly ag a legitimate supplier as susp
en
without providing a su ciently transparent basis fo
the decision. Such an outcome can cause signi cant
harm to businesses and undermine con dence in the
procurement process.
An AI-based system should therefore be su ciently
explainable for auditors and procurement
professionals to understand why a particular •
transaction or supplier has been agged. The
responsibility of accountants and auditors to exerc
professional scepticism does not disappear simply
because an algorithm makes the initial assessment.
Instead, their role expands to include reviewing th
model, its thresholds, the quality of its underlyin
and the processes through which agged suppliers or
transactions are investigated. •
Procurement fraud often thrives on transactions tha
appear routine, insigni cant or anonymous and •
therefore receive limited scrutiny. Continuous
monitoring and pattern detection are steadily
reducing the opportunity for such activity to remai
hidden. However, organisations that derive the
greatest value from these technologies are unlikely
be those that simply invest in the most sophisticat
platforms. Rather, the strongest results come from
organisations that combine technology with capable
professionals who are willing to challenge anomalie
and ask the fundamental question that has alw
been central to good auditing: Why should I believe
this?
Conclusion
The transformation of procurement through data and
automation represents a signi cant shift from perio
detection towards continuous prevention. Traditiona