Will you divide the market, or rather settle for kickbacks?
If you were to go to an automobile mechanic for a simple vehicle inspection, but the mechanic duped you into paying for unneeded repairs or fixes (or completely faked the amount of work actually performed on your car), what will you do?
Owning and maintaining your expensive automobile, can really be a lifestyle symptomp. Or maybe, you re that passionate being which you know you’re that you own the automobile mechanic shop, or it hardly matters to you and you live beyond known costs of the particular fixes. While explicitly fraudulent overbilling schemes require acumen and diligence from accounting departments, companies can also actively protect themselves from unintentional overbilling.
While overbilling schemes that seek to defraud companies are illegal, not all overbilling is necessarily fraudulent. In industries like construction with slow payment turn-around times, overbilling can be a legitimate strategy for keeping projects going instead of stopping and starting due to accounting lead times. In this scenario, overbilling allows contractors to maintain the project’s timeline by staying ahead of the project cash runway and helps to avoid costly time delays. For these reasons, some contractors will seek to enter an understanding with a slow-paying client that allows and accounts for overbilling that allows the project to stick to schedule and cost estimates. Overbilling schemes, the most common consumer fraud scheme, can be a tricky, often complicated process.
Overbilling schemes may or may not involve collusion with someone within the victim company. When an employee of the victim is involved in the scheme, he usually receives kickbacks in return for participating. This kickback is just like one of those “Et tu, Brute — Then fall, Caesar!” moment, but surely not the most unkindest cut of all. These schemes depend entirely upon weaknesses in the victim’s internal control structure for their success. Proper authorization on purchases and review of support documentation before issuing payment will defeat most stand-alone overbilling schemes.
To simplify consider a situation where a vendor might submit a fraudulent or inflated invoice to the victim organization and an employee of that organization helps make sure that a payment is made on the false invoice. For his assistance, the employee-fraudster receives a payment from the vendor. This payment is the kickback.
Kickback schemes almost always result in the victim company being overbilled. The false invoices either overstate the cost of actual goods and services, overstate the quantity of goods sold or delivered, or reflect completely fictitious sales. Usually, the amount of the kickback is included in the contract price so that the victim company bears the cost of the illegal payment.
Here’s another example, where a CARDIOLOGIST MIGHT USE ONLY ONE BRAND OF ARTERIAL STENT — OR EVEN INSERT STENTS WHERE THEY ARE NOT NEEDED — BECAUSE THE DOCTOR RECEIVES SOME FORM OF REMUNERATION FOR EACH STENT USED. PERHAPS AFTER A CERTAIN NUMBER OF STENTS, THE DOCTOR RECEIVES A LUXURY CAR, AN EXOTIC VACATION, OR COLD CASH.
Although businesses and individuals are protected by a number of consumer protection laws, there are still many opportunities for people to be taken advantage of by unethical professionals and corporations. Often, in contracting for the supply of goods and services, two or more vendors — or in some cases employees — collude to circumvent the competitive bidding process. When this happens, prices are inflated and the procuring entity is cheated out of its right to the benefits of free and open competition. The most common forms of collusion between competitors involve bid-rigging and market division.
Markets are generally divided according to geographic area or based on the customer. The result of such a division is that competing firms will not bid against each other, or they will submit only complementary bids when a solicitation for bids is made by a customer or in an area not assigned to them. The customer thereby loses the benefit of true competition and ends up paying a higher price than would be dictated by fair bidding under normal economic forces. Market division is sometimes concealed by the submission of bids from shell companies (i.e., companies that have no physical presence and generate little to no independent economic value). The corrupt vendor submits its own bid along with bids from fictitious vendors to create the appearance that there is competition for the contract, when in fact, only one supplier is actually bidding!
The post-COVID 19 global fraud detection and prevention (FDP) market size is expected to grow from USD 20.9 billion in 2020 to USD 38.2 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 12.8% during the forecast period.
The major factors fueling the fraud detection and prevention market include use of digitalization and IoT which has increased the adoption rate of FDP, and increasing revenue losses due to fraud cases. Moreover, the increasing adoption of advanced analytics in FDP and integration of AI, ML, and big data technologies in developing FDP solutions would provide lucrative opportunities for FDP vendors.
