WFY’25: Preventing factoring fraud through workflow automation

Dr. Wolfgang Goldammer, Managing Director of e-trusco GmbH, explains in his article included in the World Factoring Yearbook 2025 (WFY’25) how factoring companies can manage risk in a modern way through workflow automation. Below is an excerpt from this excellent article.

Introduction: Fraud Prevention Begins with Verification
Fraud continues to be one of the most persistent and financially damaging risks in receivables finance. While credit assessments and compliance protocols help mitigate known risks, fraud thrives in the grey areas – those spaces between policy and execution. Most fraudulent activity does not arise from aggressive debtors or obvious forgeries, but from well-structured and often seemingly legitimate transactions that conceal manipulation. In this context, the real-time verification of submitted transactions becomes the key to uncovering deception. Without verification, especially in fast-moving, high-volume operations, fraud can grow unchecked – silently accumulating risk until it becomes visible only through loss.

The Role of Verification in Detecting Fraud
Verification lies at the core of fraud detection in factoring. Unlike credit losses, which are usually attributed to market or borrower weakness, fraud often results from deliberate deception. This might include fabricated invoices, fake buyers, duplicate submissions, or collusion between client and debtor. Such risks cannot be identified solely through financial statements or onboarding checks – they require active intervention within the transaction flow.
Each invoice is an opportunity to verify truth against trust. Confirming delivery, buyer independence, or invoice consistency turns implicit assumptions into verifiable facts. Without this layer of defence, even the most robust client onboarding or debtor scoring system may fail to prevent fraud that is carefully constructed to appear legitimate.

Why Manual Selection Falls Short
In most traditional factoring models, verification is still a manual or semi-manual process. Staff are assigned to review documents, select samples, and escalate issues when suspicions arise. This system, while rooted in experience, has clear limitations. Subjective decision-making leads to inconsistency. Fatigue, time pressure, and turnover all reduce vigilance. And most importantly, this model doesn’t scale.

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To read the whole article and 42 other specialist articles and country market reviews, order World Factoring Yearbook here.