Types of Vendor Fraud You Need on Your Radar
Fraud is only getting worse.
by Ashley Poynter
Content Manager
PaymentWorksTypes of Vendor Fraud You Need on Your Radar
Vendor fraud has always been a thorn in the side of finance and procurement teams, but the types of fraud in the digital age have cranked the threat level up to eleven. Now? Fraudsters aren’t just clever—they’re well-funded, AI-enabled, and playing the long game. The result? The most dangerous types of vendor fraud today are harder to detect and more damaging than ever before.
While some schemes haven’t changed in decades (hello, phony invoices), others are evolving so fast that internal controls can barely keep up. AI-generated deepfakes, business email compromise, and credential takeovers are just a few modern tactics raising red flags for treasury, AP, and vendor managers across industries.
In this article, we’re diving deep into the most common—and most cutting-edge—types of vendor fraud you need to be aware of in 2025. We’ll explore both old-school tactics and digital-age schemes and offer up practical solutions to help your organization stay one step ahead.
Table of Contents
Tried-and-True Tactics: The Classic Types of Vendor Fraud That Still Work
Next-Gen Threats: Emerging Types of Vendor Fraud in 2025
Why These Types of Vendor Fraud Keep Winning: The Process Problem
How to Protect Against All Types of Vendor Fraud: A Checklist
Types of Vendor Fraud Are Evolving—So Should Your Response
Get Ready for Vendor Management Day 2025
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Tried-and-True Tactics: The Classic Types of Vendor Fraud That Still Work
These types of vendor fraud have been around the block, and you’ll still see them in headlines from time to time. In other words, they’re still alive and well—and they’re successful because they exploit one thing: complacency.
Business email compromise (BEC)
BEC is still a top threat in 2025—and it’s gotten smarter. Fraudsters research organizational structure, spoof legitimate email domains, and send targeted messages that appear to come from executives or known vendors.
“Hi, please update our bank details before the next payment. We’re switching to a new account.”
If your AP or vendor team doesn’t verify that request through a secure, multi-step process, congratulations—you’ve just wired money to a fraudster.
Here’s why this one works so well:
- Urgency + authority = quick action
- Realistic-looking email domains and signatures
- Exploits gaps in bank account change verification processes
Phishing and social engineering
This is one of the more adaptable types of vendor fraud. With a little research, a fraudster can tailor messages, voicemails, or even phone calls that sound eerily legit. Social engineering plays on emotion: fear of making a mistake, pressure to move fast, or trust in a “known” contact.
Why It Works:
- Low-tech, high-believability
- Targets distracted or untrained employees
- Often avoids detection until it’s too late
Next-Gen Threats: Emerging Types of Vendor Fraud in 2025
Legacy fraud is still very much a problem; however, newer types of vendor fraud are supercharged by automation and AI (not to mention access to personal and business data). These schemes are slick and often devastating.
Deepfake vendor fraud
This one’s straight out of a sci-fi movie—but it’s very real. Using publicly available audio, fraudsters can create convincing deepfake voices to impersonate vendors or executives. They’ve even been known to spoof video calls.
Case in point: In 2024, a finance worker transferred $25M after a video call with a “CFO” who turned out to be an AI-generated deepfake.
Why It Works:
- Exploits trust in voice/video confirmation
- Hard to detect in fast-paced workflows
- Feels “real” because it uses your own people’s likenesses
AI-generated fake vendor profiles
Thanks to generative AI, fraudsters can create vendor websites, business documents, and even LinkedIn profiles that look legitimate. They use stolen EINs and real addresses to build fake vendors from scratch.
Why It Works:
- Looks legitimate on the surface
- Exploits manual document verification
- Evades detection in systems without real-time identity checks
Account takeovers through credential theft
This is one of the most dangerous types of vendor fraud because at the heart of it is a real vendor. Once login credentials are stolen—often through phishing—a fraudster logs into your vendor portal and changes payment details from the inside.
Why It Works:
- Appears legitimate in system logs
- Bypasses standard onboarding checks
- Rarely triggers alerts in manual workflows
These next-gen types of vendor fraud aren’t just clever—they’re engineered to slip past outdated systems and overwhelmed teams. As the tools of deception evolve, so must the tools we use to defend against them.
Why These Types of Vendor Fraud Keep Winning: The Process Problem
Every successful fraud scheme—whether it’s a fake invoice, business email compromise, or even a deepfake phone call—has one thing in common: it preys on weak or outdated internal processes. The sophistication of today’s scams isn’t always in the technology, but in how easily they slip through the cracks of fragmented workflows and manual tasks.
Vendor fraud, in particular, is on the rise. Fraudsters are no longer just forging documents—they’re exploiting broken processes that many companies don’t even realize are vulnerable.
Here are some of the biggest process gaps enabling vendor fraud today:
- Manual onboarding workflows, often relying on email or phone, leave sensitive vendor data (like tax IDs and banking info) exposed and unverified.
- Lack of audit trails means there’s no clear record of who entered, edited, or approved vendor information, making it difficult to detect or investigate changes.
- Decentralized ownership across departments, such as procurement, finance, and IT, creates confusion and inconsistent standards.
- No formal identity verification for new vendors’ tax IDs, credentials, or financial details makes impersonation easy.
- No alerts or approval gates when critical information like banking data is changed, creating a perfect window for fraud to go unnoticed.
In short, these scams keep working not because they’re brilliant but because the systems they target are fragmented, slow, and outdated. Many organizations still rely on manual processes or spreadsheets with no real-time validation or control. As businesses grow and bring on more vendors across more platforms, these cracks only widen, creating even more opportunity for fraudsters to exploit.
Fixing the tech is only half the battle. Rebuilding the process—with better visibility, verification, and accountability—is what truly stops fraud at the source.
How to Protect Against All Types of Vendor Fraud: A Checklist
The best protection against today’s evolving types of vendor fraud isn’t just firewalls and best intentions—it’s a proactive, tech-enabled strategy that closes the specific gaps fraudsters are counting on. You don’t need a crystal ball. You just need to anticipate the weak spots and shore them up with smarter systems and tighter processes.
Here’s what that looks like:
Standardize vendor onboarding
Ad hoc onboarding is a fraudster’s dream. When every department uses its own process (or worse, no process at all), you lose consistency, accountability, and visibility.
What to do:
- Centralize vendor onboarding under a single platform or team.
- Use role-based access to ensure only authorized individuals can create or edit vendor profiles.
- Eliminate spreadsheet uploads and email forms—use secure, controlled workflows.
A standardized process means no one’s going rogue with vendor data, and you can audit everything, end to end.
Automate identity verification
Taking documents at face value isn’t verification—it’s wishful thinking. Sophisticated types of vendor fraud rely on fake W-9s, doctored voided checks, and deepfake business profiles to slip through the cracks.
What to do:
Use a system that automatically validates:
- Legal business name and EIN (against IRS databases)
- Bank account ownership and routing accuracy
- Physical address and email domain legitimacy
- Insurance documentation with expiration tracking
- Sanctions or watchlist status (OFAC, SAM.gov, etc.)
Automation removes guesswork and gives you confidence that your vendors are who they say they are—before they ever touch your ERP or your payment file.
Eliminate email-based credential collection
Email is great for newsletters. It’s terrible for collecting sensitive financial data. Bank account updates sent via email are easy to spoof, intercept, or manipulate—especially when fraudsters have studied your workflows.
What to do:
- Replace email with a secure, authenticated vendor portal
- Require multi-factor authentication for login and change requests
- Log all submitted documents in a tamper-proof audit trail
This single change can close the door on one of the most exploited entry points in modern vendor fraud schemes.
Maintain an end-to-end audit trail
If you can’t tell who changed a vendor’s banking details—or when—you’ve already lost the visibility you need to investigate, report, or recover from fraud.
What to do:
- Track every action related to vendor onboarding and updates
- Time-stamp all approvals, rejections, and document changes
- Ensure that audit data is easy to access across departments
An audit trail isn’t just for compliance—it’s your real-time risk monitor and your backup plan when something goes sideways.
Educate employees on new types of vendor fraud
Your fraud prevention is only as strong as the person responding to the next suspicious email. Even the best systems can be undone by one click—or one call—from an unsuspecting employee.
What to do:
- Offer regular, role-specific training on:
- Phishing and spoofed emails from “vendors” or “execs”
- Red flags in submitted documents
- Pressure tactics and urgent change requests
- Deepfake threats in voicemail or video messages
- Simulate scenarios and walk teams through response plans
People aren’t the weakest link—they’re the first line of defense. Equip them accordingly.
Use a secure platform with indemnification
Automation is great. Risk transfer is better. Platforms like PaymentWorks not only validate vendor identity and automate onboarding, they indemnify your organization against certain types of ACH payment fraud.
What to do:
- Choose a solution that doesn’t just verify—it protects
- Understand what types of fraud are covered and under what conditions
No one plans to be a victim. But if a bad actor still gets through, indemnification turns a financial disaster into a contained event, with your budget intact.
Reevaluate your insurance
Think you’re covered for payment fraud? Think again. Many cyber and crime policies don’t cover social engineering, internal errors, or impersonation scams unless you’ve explicitly added those riders.
Be sure to:
- Review your policy with legal and finance leaders
- Confirm what’s covered—and what’s not
- Work with your broker to add coverage for BEC, social engineering, and unauthorized payments
Fraud is expensive. Insurance helps—but only if you’re covered for the fraud scenarios that actually happen in 2025.
Types of Vendor Fraud Are Evolving—So Should Your Response
It’s 2025, and the types of vendor fraud we face today are more advanced, more convincing, and more devastating than ever before. From traditional invoice scams to AI-generated deepfakes, organizations need more than just best intentions to stay protected.
The good news? You don’t need to live in fear. With the right processes, technology, and mindset, you can drastically reduce your exposure and outsmart even the most sophisticated schemes.
But it starts with awareness.
Know what to look for. Know how it happens. And most importantly, know how to close the gaps.
At PaymentWorks, we help organizations take vendor onboarding from reactive to resilient, so you can stop fraud before it starts and focus on growing with confidence.
Get Ready For Vendor Management Appreciation 2025
The Vendor Management Appreciation Day (#VMAD) celebration continues in 2025! And you should join us.
Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.
Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2025 celebration, and we want you to be a part of it!
VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.
Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.
In the meantime, learn more here, and grab some free vendor management goodies.
Want Help Aligning Teams On Preventing Different Types of Vendor Fraud?
Explore our blogs below. They’re filled with action items you can implement right away.
Why a Weak Vendor Identification Process at Onboarding Makes You Vulnerable to Fraud
Vendor Verification: How NOT to Do it and What to Do Instead
The New Face of Vendor Fraud Cases
Interested in Regular Tips On Preventing Different Types of Vendor Fraud?
Want Personalized Guidance On Preventing Different Types of Vendor Fraud?
