How to detect and avoid fraud using AI-powered OCR
Stop invoice & receipt fraud with next-gen AI OCR fraud detection.
Pop quiz time. What do giants like Amazon and Google have in common with Mr. & Mrs Jones’ wholesale grocery across the street? Or Johnny Automobile’s car repair business downtown?
It doesn’t matter if you’re a mom-and-pop store or a multi-billion dollar concern. The great equaliser is the sheer volume of receipts and invoices.
You could have the hardest working, most experienced Accounts Payable team in the world, and the numbers game would still make it impossible for them to manually sift through hundreds per month and check for fraud, driving up the chances of a phoney invoice or two sneaking through — and that’s all the opportunity criminals would need to con you out of thousands to millions.
The Real Bottleneck in Fraud Detection: What’s Stopping Us?
Spoiler: it’s not digitisation.
General purpose OCR has gotten good enough that you can rely on them to scan all your purchase orders, invoices, and receipts, digitise them and throw them into a PDF…but forcing your people to manually eyeball documents and compare each set for fraud is neither generating business value effectively nor ensuring due diligence.
The real bottleneck, then, is retrieving relevant, structured data from documents automatically to begin with. If you can optimise this, it would streamline your entire fraud detection workflow — all the way from purchase orders filed, to payments released.
That’s where we come in.
TAGGUN is a next-gen AI/Machine Learning solution for receipt scanning, that combines state-of-the-art OCR with AI powered duplicate and fraud detection — and operates as a secure, easy-to-use, easy-to-integrate REST API in the cloud.
You send in images or scanned PDFs of your purchase orders, invoices, and receipts, and get back verified structured data in real-time, in JSON, ready to be used. No queues. No pooling. No need for dedicated on-premise AI/ML hardware of your own.
Generating verified structured, easily-parsable data from just images of receipts is pretty neat, sure, but how does this help your fraud prevention teams? For that, let’s talk about the 3 most common types of business fraud, and see how our features can help in each case.
The 3 Main Types of Fraud and How TAGGUN Protects Your Business
1. Duplicate Receipts or Invoices
How traditional OCRs fail to detect duplicate receipts or invoices
The simplest kind of fraud is also the most likely to succeed, depending on how your internal bookkeeping works.
Most Accounts Payable systems that work with OCR tech will just accept a receipt or invoice, scan it, see if the numbers are where they are expected to be, in the format/layout they are expected to be in, and mark it as a successful operation if so.
Traditional OCR + template-based security measures that check for validity do not take into account the simple possibility that the original invoice, while valid, may have been submitted for reimbursement more than once by a shady supplier.
How an AI-powered OCR solution can help identify duplicate invoices
Where traditional systems may stumble, an AI-powered OCR duplicate and similarity check succeeds because, for each and every receipt added to the system, an MD5 hash is generated — a sort of digital signature unique to each image/scanned PDF. These can be stored with even lower storage requirements than the actual image/scanned PDF.
TAGGUN generates these cryptographic hashes for you on the server side and sends them back as part of the JSON response. Having this value for each invoice means your AP/Fraud teams no longer have to manually pore through documents line by line to check for duplicates — this comparison process can be entirely automated with software, at a much faster pace than human beings ever can, using very little computing power. If the hash values are different, everything’s good. If there is a match, it indicates that the current invoice is a duplicate, and can be automatically flagged by the system for further review.
An AI-powered OCR solution can offer business owners a lot more compared to a general-purpose OCR. Here’s an article that covers this in detail.
2. Tampered Receipts and Invoices
Why Traditional Approaches Fail: Traditional OCR systems generally lack the ability to detect subtle digital manipulations such as altered dates, amounts, or merchant details. This leaves businesses vulnerable to fraud through carefully tampered receipts or invoices.
How TAGGUN Solves This: TAGGUN AI powered OCR provides AI powered fraud detection tools with robust Digital Tampering Detection capabilities that recognise digitally altered receipts, including changes to transaction details and fake or AI-generated documents. Using advanced image analysis methods like Error Level Analysis (ELA), metadata inspection, and pixel-level examination, TAGGUN identifies discrepancies and flags potentially manipulated documents. Additionally, Handwritten Receipt Detection flags receipts containing handwritten text, which are more susceptible to fraud and may require further verification.
How frauds use altered receipts and invoices to trick businesses into paying more for less
Example of Receipt Fraud in Loyalty Campaigns and Employee Expense Management
Let’s say your company runs promotional rewards campaigns or manages employee expense reimbursements. An individual submits a legitimate receipt once to claim their reward or reimbursement but then attempts to exploit the system. They digitally alter the receipt—changing the date, slightly adjusting the transaction amount, or copying and pasting sections from another receipt—to resubmit multiple times for additional rewards or reimbursements.
Without sophisticated detection mechanisms, these subtle changes can often go unnoticed, allowing individuals to repeatedly benefit unjustly, significantly impacting campaign profitability and expense management integrity.
Example of Invoice Fraud in procurement
Imagine your procurement team receives an invoice for high-end laptops purchased from a reputable vendor. A dishonest supplier manipulates the invoice details, subtly inflating the cost per laptop or altering the specifications to reflect a higher-value model than was delivered. Without meticulous manual verification, your accounts payable team may unintentionally approve these altered invoices, resulting in substantial financial losses.
How TAGGUN AI detects receipt and invoice fraud
TAGGUN employs a suite of advanced fraud detection features, including digital tampering detection (e.g., Error Level Analysis (ELA), metadata analysis, and pixel-level inspection), duplicate and similarity checks, and handwritten receipt detection. Each receipt or invoice is analysed comprehensively, generating a fraud score that highlights potential discrepancies or manipulations. This robust detection system instantly flags invoices and receipts showing signs of fraud, enabling your rewards, procurement or expense management teams to more efficiently identify and address fraudulent submissions.
TAGGUN’s API workflow for Receipt and Invoice Fraud Detection
- Submit Receipt or Invoice: Files sent to TAGGUN APIs undergo advanced fraud detection checks.
- Analysis: The system employs multiple algorithms to detect duplicates, digital manipulations, and handwritten content.
- Scoring: Each file is assigned a fraud risk score.
- Results: Detailed fraud detection results accompany the structured data in the API response, enabling quick decision-making.
TAGGUN streamlines your fraud detection workflows, reducing manual intervention, speeding up the validation process, and enhancing accuracy—all without replacing your existing ERP system or accounts payable staff. Instead, it empowers your team to efficiently handle exceptions, improving overall business operations and security.
3. Shell Companies and Fake Vendors
How business owners can be deceived by shell companies or fake vendors
The premise is simple: someone studies how your company works over time — the compliance services and subscriptions you use, your caterers and their food bills, and the suppliers you use for office goods…and then, they create a phantom/shell company, one that has no presence but for the mailing address, and send in invoices that look exactly like the legitimate ones you already pay in bulk per month, to collect disbursement from you for goods/services that were never sent.
How an AI-powered OCR protects businesses from fake vendors
An AI-powered OCR automatically identifies and verifies the tax or receipt id number validity of any transaction and vendor on receipts/invoices, using a number of search engines — the VAT Information Exchange System (VIES) for VAT number verification in the EU, the fapiao for China, and IBAN, internationally. This information is included in the JSON response you get for each scan, like so:
This way, you can be sure that a legitimate transaction actually took place, and that you’re being charged by a supplier who is legitimate — they are who they say they are and are properly registered in the country that they say they are.
If TAGGUN doesn’t send you this verification, you can flag the transaction for manual review.
Getting away with faking VAT, fapiao, and IBAN information is incredibly difficult with the current authentication systems in place worldwide, so automatically having that information at your fingertips is peace of mind for you as a company.
Automating Fraud Detection is the Only Viable Option
Fraud risk is an everyday business reality, regardless of your company's size or industry. While vigilance is essential, relying on manual fraud detection can be costly and time-consuming. Our AI powered fraud detection tools help protect your business efficiently and effectively. Try out our online fake receipt checker to see how it works.
Information gathering is labour intensive so personnel stress is always a factor, there are issues with scans of receipts/invoices being of poor quality, misaligned, with artefacts, or all at once; and that pile of invoices and receipts will only grow taller each day if your Expenses, AP, or Rewards team can’t get the data they need, at the pace they need.
We can help you to automate the three biggest pain points of your fraud management workflow — gathering accurate information, having it processed in real-time, and having it be structured — saving you time and money, empowering your AP staff, and enabling them to focus on bigger, better things.
Feel free to check out our pricing page and choose the plan that suits you best.