Tod McDonald is co-founder of Valid8 Financial and has spent decades tackling complex financial cases, including uncovering a $200 million real estate Ponzi scheme.

The movie The Big Short captured the reality of fraud: It looks like business as usual. In the film about the 2008 economic crisis, a handful of investors pieced together what banks and regulators overlooked — mortgage-backed securities were built on bad loans destined to collapse. These individuals didn’t unravel an elaborate plot; they simply took the time to examine the underlying numbers.

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While most people never saw the economic collapse coming, the evidence was right in front of them. The money trail hides in plain sight. Whether losses total a few hundred dollars or topple the global economy, most fraud schemes are usually as simple as camouflaging illicit transactions within routine business activities.

Detection is not as straightforward. The average case lasts 12 months before companies discover it. Fraudsters exploit high-volume processes that don’t receive intense scrutiny due to limited resources.

When finance teams understand where oversight breaks down — and have the tools to monitor these areas — they can reduce financial losses.

Vendor payments

In business, scammers use familiar vendor ties to cover up misappropriation. For example, they might send a payment to a fake company whose name closely resembles a legitimate partner (e.g., Finance Solutions rather than Finance Services) or alter the banking details of an existing vendor. The approver recognizes the business’s name at a glance and signs off.

To spot this tactic, accountants should look for:

Vendors with nearly identical names.
Vendor addresses or tax IDs that match employee data.
Changes to vendor contact or banking information.
Resumed payments to paused or terminated vendors.
New vendors created without proper onboarding or verification.

Transaction logs

Illicit transactions often get lost amid the volume of legitimate activity. Fraudsters subtly manipulate payments in ways that go unnoticed during routine processing, but these tactics do leave a trail if someone looks hard enough.

Unusual transaction patterns potentially signaling fraud include:

Duplicate vendor payments
One-off payments just below approval thresholds
Multiple small payments to the same account
Reimbursements or wires lacking documentation
Frequent “rush” or off-cycle payments

Payroll

High-volume, recurring expenses like payroll receive minimal review, making these transactions an ideal place to bury fraud. Even minor changes often go unnoticed, but they can accumulate quickly.

Signs of payroll fraud include:

Payroll increases without corresponding growth in headcount or wages
Employee compensation that’s incongruent with peers
Payments to inactive, fictitious or recently offboarded employees
Department expenditures that don’t match staffing levels
Unusual patterns in overtime or bonus payments
Multiple employees sharing the same bank account or mailing address

A lack of internal controls, such as consolidated authority or a cultural tolerance for financial irregularities, enables these fraud schemes to fester undetected.

Simple schemes, difficult detection

Despite the simplicity of fraud schemes, businesses face many hurdles in exposing them. The sheer volume of transactions, in tandem with limited resources, means finance professionals lack the capacity to examine each line item. Leaders sometimes let confidence in their employees outweigh evidence, delaying necessary inquiry until the losses become too big to ignore. The company must then weigh the cost of an investigation against the likelihood of a meaningful outcome.

Uncovering schemes before they inflict significant damage requires the finance profession to enhance its investigation capabilities. Technology can be a force multiplier that makes early fraud detection possible.

Technology changes the equation

Tools like Verified Financial Intelligence (VFI) automate data preparation and analysis. These platforms then flag anomalies and trends based on a full population analysis. The investigation takes only a fraction of the time and cost of a manual review, while producing more comprehensive and defensible evidence.

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With automation, finance teams can respond quickly and efficiently to any concern or irregularity, rather than waiting for undeniable proof or significant losses. Automation will eventually enable finance professionals to graduate from periodic sample audits to continuous monitoring of every payment.

When combined with enhanced internal controls, such as dual approvals, vendor verification, regular reconciliations and role-based access, automated financial analysis will eliminate many fraud opportunities.

When detection becomes as simple as the schemes, fraud loses its greatest advantage.