Supply Chain Fraud Starts Where Communication Breaks Down
Most fraud doesn’t beat your controls. It walks through the gap between teams who each assumed someone else had checked.
A supplier’s accounts team emails yours on a Thursday afternoon. They’ve changed banks, the new details are attached on headed paper, and could the next payment go to the new account, please. It’s polite, it’s plausible, and it’s sitting in an inbox purchasing can’t see.
Accounts payable updates the vendor record. Purchasing, who’ve spoken to that supplier every week for six years, never hears about it. The warehouse keeps receiving the supplier’s deliveries as normal. Three weeks later, a six-figure payment goes to an account the real supplier has never heard of. That’s supply chain fraud in its simplest form.
Nobody in that story was careless on their own. Each team did its job with the information it had. That’s what makes it so hard to see. It rarely beats your controls head-on. It gets in through the gaps between the teams that run them.
The short version: supply chain fraud thrives where purchasing, receiving, inventory and finance work from different information and don’t check each other’s. A broken handoff gives a fraudster the opening, and the same silence keeps it hidden, often for a year. Closing those gaps is mostly about verification, separated duties and one shared record, and very little of it needs new software.
What is supply chain fraud?
Supply chain fraud is any deliberate deception that takes money or stock from an organisation through the way it buys, receives, stores, moves or pays for goods. It can come from outside, like a criminal posing as a supplier. It can come from inside, like a buyer taking kickbacks or a warehouse worker writing off stock they’ve taken. Quite often it’s both, with someone inside working with someone outside.
The sums aren’t small. The ACFE’s latest study of occupational fraud, Occupational Fraud 2026, looked at 2,402 cases across 143 countries and found a median loss of $104,000 per case. The fraud examiners it surveyed estimate that organisations lose 5% of revenue to fraud every year.
How does a communication breakdown lead to supply chain fraud?
Fraud investigators often explain fraud with the fraud triangle: pressure, opportunity and rationalisation. A business can’t do much about the first and the last. Opportunity is the part it controls, and poor communication creates a lot of it.
When teams don’t talk, two things go wrong. Each team checks only its own piece, so nobody checks how the pieces fit together. And when someone does spot something odd, they don’t know whether it matters, or who to tell.
That second one matters more than it sounds. In the ACFE study, 43% of frauds were found because someone reported a tip, and more than half of those tips came from employees. A warehouse that never talks to finance has fewer people in a position to notice a problem, and fewer reasons to mention it.
Five gaps where supply chain fraud gets in
1. Bank details changed by email
This is the scene from the top, and it’s the most common version. The FBI’s 2025 Internet Crime Report logged 24,768 business email compromise complaints, with reported losses of just over $3 billion. Its definition specifically mentions businesses that work with suppliers.
Size doesn’t protect you. A Lithuanian man was sentenced to five years in prison after tricking two US internet companies into wiring over $120 million. He’d registered a company in Latvia under the name of an Asian computer hardware maker they did regular business with, sent their staff phishing emails, and backed it all up with forged invoices, contracts and letters.
The gap is simple. The person who changes a supplier’s bank details usually isn’t the person who knows the supplier.
2. Receiving that doesn’t feed accounts payable
Most finance teams use a three-way match: the purchase order, the goods receipt and the invoice have to agree before anyone pays. It’s a good control. It only works if the receipt is real.
If receiving books the PO quantity because the driver’s waiting, the match passes every time. Short deliveries get paid in full, and a supplier who notices can keep doing it. If the person who receives the goods can also approve the invoice, the control isn’t really there at all. We’ve looked at how often receiving and stock records drift apart in Receiving Data vs Inventory Records: Close the Gap.
3. Supplier relationships only one person sees
Buyers need close relationships with suppliers. The risk starts when only one person has that relationship and nobody else sees the quotes, the price changes or the reasons behind them.
That’s where kickbacks, inflated prices and orders split to stay under an approval limit tend to live. Corruption, which covers kickbacks and conflicts of interest, appeared in 45% of the cases in the ACFE study. The ACFE also lists an unusually close relationship with a vendor or customer among the warning signs linked to the biggest losses, with a median of $300,000.
Ghost vendors live here too: a supplier that only exists on paper, set up by someone who can also approve its invoices. Checking who you’re buying from before they go into the system helps, and we’ve covered that in Supplier Screening: Know Who You’re Buying From.
4. Stock adjustments nobody questions
In the warehouse, theft rarely shows up as theft. It shows up as an adjustment. A pallet gets written off as damaged. A cycle count variance gets booked with the reason code “other”. Shrink creeps up a little each quarter and gets explained away as the cost of doing business.
If finance only ever sees a total and the warehouse only ever sees the floor, nobody asks why the same SKUs keep going missing on the same shift. We’ve written about how that pattern hides in warehouse fraud is quieter than you think.
5. Returns and credits handled on the side
Returns are messy, and messy suits a fraudster. Goods go back to a supplier, but the credit note never arrives, or lands against a different account. Customer returns get refunded but never make it back onto the shelf. When the returns process lives in email threads between people who don’t share a record, money can leak out of it for months, and the warehouse and finance end up with refund numbers that don’t match.
Why it can run for a year before anyone notices
In the ACFE study, a typical fraud lasted 12 months before it was found. Silos explain a lot of that.
Each team’s numbers look fine on their own. Purchasing sees a supplier delivering on time. The warehouse sees stock that roughly matches. Finance sees invoices that pass the match. The problem only shows up when someone lays all three side by side, and in a siloed business, that’s nobody’s job. It’s the same reason finance and warehouse numbers never match in the first place.
Warning signs worth a second look
None of these proves fraud. Each one is a reason to ask a question.
A supplier changing bank details by email, especially with urgency attached
Invoices that land just under an approval limit, again and again
The same person setting up vendors and approving their payments
Goods receipts that always match the PO exactly, down to the last unit
Write-offs clustered on one login, one shift or one group of SKUs
A supplier whose prices drift up with no renegotiation on record
Someone who never takes leave and won’t let anyone cover their work
That last one sounds old-fashioned, but the ACFE still lists refusing to take vacations among the costliest red flags, with a median loss of $250,000.
How to close the gaps
Most of this is cheap. It’s process and habit, and you can start this month.
Verify every bank detail change by calling the supplier on a number you already hold, never one from the email asking for the change. Make it a rule, not a judgement call.
Separate the jobs that check each other. The person who sets up a vendor shouldn’t approve its payments, and the person who receives goods shouldn’t approve the invoice.
Make the goods receipt honest. Count what arrives, even when the driver’s waiting. Blind receiving, where the receiver doesn’t see the PO quantity, gives the three-way match something real to check.
Give every stock adjustment a reason, a name and a date, and have someone outside the warehouse review the pattern each month.
Count often, and not on a schedule anyone can predict. Regular cycle counts by rotating counters catch shrink while it’s still small.
Put purchasing, the warehouse and finance in front of the same numbers. Half an hour a month looking at the same POs, receipts, invoices and counts will catch things none of the three teams can see alone.
And make it easy to speak up. If tips catch more fraud than anything else, the receiver, the picker and the AP clerk need a way to raise something without it turning into a confrontation.
Questions people ask about supply chain fraud
What is supply chain fraud?
Deliberate deception that takes money or stock through the way an organisation buys, receives, stores, moves or pays for goods, from fake supplier invoices to kickbacks and theft hidden as stock write-offs.
What are the most common types of supply chain fraud?
Changed or fake supplier bank details, invoices for goods that never arrived, kickbacks and inflated prices, ghost vendors, and theft hidden as stock adjustments or returns.
How does poor communication make supply chain fraud easier?
Each team checks only its own piece, so nobody checks how the pieces fit. People who notice something odd don’t know whether it matters or who to tell.
How is supply chain fraud usually detected?
Most often by a tip. In the ACFE’s 2026 study, 43% of frauds were detected after a tip, and more than half of those tips came from employees.
How can the warehouse help prevent supply chain fraud?
By recording what really arrives, giving every adjustment a reason and a name, counting regularly, and sharing its numbers with purchasing and finance.
Make the stock record hard to argue with
Every one of these gaps gets smaller when the warehouse’s numbers can be trusted and everyone can see them. CountIt logs every count with the user, date and time and reports the financial impact, and it runs on phones and tablets, online or off. See how it works at count-inventory.com.
If you’d like help setting up the counting and receiving routines around it, talk to us at Yuneva.
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