Are You Actually Reducing Security Risks?

Accepting scanned documents by email isn't digitization: it's a liability dressed up as progress. Many organizations have partially digitized their buying and lending processes and stopped there. That gap between partial and complete is exactly where fraud thrives.

Deloitte has warned that while 85% of CEOs accelerated digital transformation initiatives during the pandemic, most can't articulate their progress beyond the fact that they made an investment. The money moved. The risk didn't.

While consulting firms espouse advanced digitization concepts like AI, data suggests that many companies are still struggling to cope with basic tasks. For example, two-thirds of companies are still grappling with document storage.

Key takeaways

• ​Partial digitization risks: Relying on emailed scans or fragmented processes creates security gaps that attackers exploit.
• ​Common fraud tactics: Incomplete systems are vulnerable to Business Email Compromise (BEC), mandate fraud, and synthetic identity theft.
• ​The human factor: Manual document verification is prone to oversight, social engineering, and sophisticated forgeries.
• ​Automation is essential: True security requires end-to-end automation, secure submission channels, and third-party identity verification.
• ​Building digital trust: Complete digitization protects personal data, which is a primary factor in consumer purchasing decisions.

The danger of fragmented processes

A half-finished digitization program doesn't reduce risk: it reorganizes it. More than four in five respondents to a Ponemon Research survey believed that they had suffered a data breach as a direct result of digital transformation.

Failing to fully digitize a process fragments it, leaving steps that still rely on manual input, paper-based documents, or unverified email submissions. Those gaps become weak points that attackers can exploit.

The assets at stake are sensitive: money, personal data, account credentials. But the damage doesn't stop at a single transaction. Fraud in a partially digitized workflow can ripple across the entire supply chain, disrupting cash flow, straining vendor relationships, and opening the door to ransomware or other malware.

How human error enables fraud

Not every breach starts with a sophisticated attack. Some start with a distracted employee. Whenever a human is the only checkpoint in a workflow, errors follow, driven by overwork, fatigue, and the sheer volume of documents moving through the system.

Some incidents are down to malice rather than mistake. Fraudsters frequently use social engineering techniques to convince business victims to send payments to illicit bank accounts.

Common types of fraud resulting from partial digitization include:

• ​Business Email Compromise (BEC): Fake invoices sent via email that bypass manual verification, leading to illicit payments.
• ​Mandate fraud: A criminal impersonates a legitimate vendor and persuades the payee to change their bank details on file to a fraudulent account. The fraudster then collects payments that should have gone to the original payee.

These attacks started simply but have become more sophisticated over time as victims have awoken to the problem. BEC fraud continues to be a major problem. The FBI estimates that victims have lost $43 billion to these attacks between October 2016 and December 2021.

BEC can hit consumers too. Criminals have targeted high-value industries such as real estate and financial services to scam individuals. In Atlanta, one man was jailed after collecting more than $247,000 in fraudulent funds from home buyers. He called his victims and impersonated their realtors, asking them to wire funds to fraudulent business accounts. An automated process on the realtor's side, along with an educational session warning the home buyer against such attacks, would have helped avert disaster.

Document forgery and synthetic identities

Forgery is another form of fraud that can subvert partially digitized buying processes. Modern technology makes it far easier for people to forge documents today, creating convincing IDs and other assets that might fool individuals tasked with checking them manually. What would have taken a scalpel, glue, carefully chosen paper, and a typewriter back in the day can now be accomplished on a smartphone. There are even online criminal services that will produce these documents for attacks.

Another example of criminal innovation is the use of synthetic IDs. These combinations of fake and real personal information are difficult to spot because there's often no individual victim to raise the alarm. Compounding the problem is the fact that only half of synthetic ID fraudsters apply for fraud using digital channels.

Automation is key

All of these fraudulent attacks can be launched using digital documents. Fake invoices and invoice mandate attacks can arrive via email, as can forged or synthetic identity details. This highlights a key point: accepting digital documents via email isn't enough to truly digitize a buying process. A human employee can be just as easily fooled by an emailed digital document as by a paper-based one.

A fully digitized system involves extra measures. One of these is control over the specific channels used to submit information in the buying process. This prevents the phishing emails and telephone calls that criminals use to perpetrate these frauds, and it enables companies to impose appropriate access controls for document submissions.

This measure is part of a broader approach that is crucial to the digitization process: automation. Any part of the buying process that relies entirely on human input with no automated checks will be more vulnerable to attack. Automating from end-to-end, using third-party notarization and identity verification services, is a crucial part of the digitization journey.

Building digital trust

Companies that take these final steps toward complete digitization stand to make significant gains. Digital trust is a top requirement for consumers as data breaches keep hitting the headlines. PwC found that protection of personal data tops consumers' lists of trust criteria, with 62% citing it as a key factor. That's a statistic that all CEOs should note, given that half of all consumers base their purchasing behavior on how much they trust a vendor.

Complete end-to-end digitization will do more than reduce your cybersecurity risk: it will build better relationships with your customers. That helps reduce bottom-line losses from fraud while also bolstering revenues.

Proof helps organizations close these gaps by verifying identities and automating the document workflows that fraud targets most. Contact us to learn how end-to-end automation can protect your business.