Fraud has been a concern for as long as supply chains have existed. However, as supplier and logistics networks have grown increasingly complex and demands for speed have risen, it’s become a larger issue. There are more instances where various kinds of fraud can occur, and threats often happen quickly, making it difficult to spot them before it’s too late.
Retailers, manufacturers, suppliers and logistics providers can all feel the effects of this crime. Consequently, fighting it and learning which tools can help is critical.
Rising Supply Chain Fraud
New technologies provide better ways of finding and preventing supply chain fraud. At the same time, they are often expensive, so organizations must approach them from an investment perspective. That starts with recognizing the true costs of fraud in today’s supply chains.
According to the Federal Trade Commission (FTC), the U.S. lost $12.5 billion to fraud in 2024, a 25% increase compared to the prior year. While the FTC focuses on consumer-facing issues in such reports, the trend highlights how technological advances have made scammers more effective than ever.
Supply chain-specific challenges have likewise risen. A 2024 PWC survey found that 55% of global organizations say procurement fraud is a widespread problem in their countries, yet 42% lack a risk management program. Amid this trend, supply chain fraud has become one of the top three most disruptive economic crimes in the past two years, with only cybercrime and corruption ranking higher.
Given these considerable losses, businesses must do more to prevent supply chain fraud. Real-time verification is one of the best defenses across all forms of this crime, as it can spot and stop fraudulent activity as soon as it arises. Such technology comes in several forms, too.
AI Transaction Monitoring
One of the most impactful real-time anti-fraud measures is to monitor every transaction with AI. AI analyzes vast amounts of data in minimal time, making it the ideal tool to recognize when a supply chain transaction does not align with normal activity.
Organizations using AI to monitor for scams have already seen impressive returns. The U.S. Treasury Department credits the technology with preventing and recovering over $4 billion worth of fraud in fiscal year 2024 alone.
This technology can be applied at virtually any point in a supply chain. Businesses could use it to verify vendor transactions, protect end users, or watch dealings with 3PLs. Company leaders can immediately freeze funds when AI-backed monitoring alerts them to suspicious activity. AI also tends to reduce false positives in this application, ensuring supply chains remain efficient despite tighter security.
Authorized Account Protection
Some instances of supply chain fraud involve the compromise of legitimate accounts. These situations can be difficult because both parties in a transaction are authorized and trustworthy from the surface, so they may not stand out as suspicious at first. Real-time technologies like AI and multi-factor authentication (MFA) can help.
MFA provides an extra layer of verification at the point of login to ensure every user is who they say they are. As straightforward as it seems, it makes accounts 99% less likely to be hacked, significantly reducing the chance of impersonation schemes.
AI bolsters these protections through behavioral analytics. When ML models learn how authorized users tend to behave on a network, they can spot unusual patterns that may suggest someone else has taken over the account. They can freeze and flag the account before fraudsters cause too much damage.
Location Tracking
Supply chain organizations can also fight fraud by tracking shipment locations in real time. This practice has grown increasingly common since it boosts transparency and ensures efficiency, but it can also play a role in preventing theft and cargo scams.
Cargo theft led to $330 million in losses in 2023 alone. This recent growth stems from items passing through so many hands and a lack of visibility around these stops. Real-time location tracking through the IoT provides the assurance necessary to catch and stop these incidents.
When manufacturers can trace a shipment’s location at all times, they can verify that each product is where it should be at any point. Any deviation will be immediately noticeable, enabling timely responses.
Blockchain Transactions
Some companies have implemented blockchains to foster a more transparent supply chain. Blockchain—the underlying technology behind cryptocurrency—enables secure transactions because every action is visible to all users and records are unchangeable.
Creating an immutable record of each product’s origin and every time it has changed hands leaves little room for theft or fraud. Blockchains also do so without delaying operations. Walmart uses the technology to trace produce to its original farm within just 2.2 seconds, highlighting the speed at which these systems can operate.
Another benefit of blockchain technology is the possibility of smart contracts, which automatically execute operations based on pre-determined conditions. A smart contract could withhold payment until both parties’ identities are verified, ensuring security and efficiency simultaneously.
Proactive Risk Monitoring
Real-time verification can enable broader prevention measures, too. Applying additional scrutiny and authenticating a supplier or 3PL’s trustworthiness before doing business with them is a critical anti-fraud step. However, it can be slow and expensive. AI can perform this analysis in real time to remove that barrier.
AI can review a company’s history and legal documentation to verify whether it’s a trustworthy partner without extensive delays. In some cases, ML models may be able to compare multiple parties to find the ideal supplier or 3PL. Despite the closer analysis, these inspections take less time than manual methods, helping justify them to stakeholders.
Choosing supply chain partners more carefully will make fraud far less likely. Scams are still possible through impersonation and malicious insiders, but the other applications of real-time technology can address these areas.
Real-Time Technologies Fight Supply Chain Fraud
AI, IoT, blockchain and related innovations offer the speed and accuracy today’s businesses need to overcome supply chain fraud. Where they cannot prevent crime, they can uncover it for faster response and recovery. Organizations cannot overlook this potential as the supply chain fraud threat grows.
