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Steps to minimise supply chain fraud

As businesses are becoming increasingly reliant on longer, more complex supply chains, the opportunities for fraud are increasing. Tim Philips looks at what can be done to prevent it.

For 23 years, Rob Holmes, a private investigator at IP Cybercrime, has been travelling the world on behalf of multinational companies to investigate fraud. “The crimes never go away,” he says, “but the medium changes.”

In the 1990s, globalisation and the development of longer, more complex supply chains changed the scale and scope of crimes he investigated. Recently, Holmes investigated how organised criminals have been purchasing genuine goods and returning them for a refund. A footwear manufacturer hired him after discovering thousands of pairs of shoes that, according to its records, shouldn’t have existed. The returns were fakes, only discovered by the retailer when the items were retagged and resold. “They were leaving the overseas warehouse early, before they were tagged for shipment,” he says. “That happens a lot when you’re dealing with a manufacturing supply chain. You’re often dealing with a factory somewhere else that you don’t know much about.”

It’s hard to accurately estimate the extent of supply chain fraud, not least because of the wide range of crimes it encompasses. Kickbacks on raw material purchases, intellectual property theft, counterfeiting, fraudulent certificates of origin, quality assurance fraud, and inventory fraud are just a few. According to PwC, food fraud alone costs the global economy more than $40bn a year, which adds around $5 to the price of an average weekly shop. The extent of food fraud has pushed many retailers and suppliers to consider radical technology solutions, notably blockchain.

This is an extract from the Business & Management Magazine, Issue 264, May 2018.

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