Vendor Due Diligence in the Age of Deepfakes and AI Fraud: What You Need to Know
Things are getting...scary.
by Ashley Poynter
Content Manager
PaymentWorksVendor Due Diligence in the Age of Deepfakes and AI Fraud: What You Need to Know
We’ve entered an era where trust is no longer enough.
Thanks to deepfakes, AI-generated voice scams, and synthetic identities, reality itself has become easy to fabricate. That’s a serious problem for vendor due diligence. In this high-speed digital age, fraud is faster, more convincing, and more automated than ever. The tools used to deceive organizations are no longer just in the hands of elite hackers. Now, they’re available to anyone with an internet connection and a bit of motivation.
That means the old ways of verifying who we’re doing business with (e.g., emails, phone calls, PDFs) are outdated and dangerous.
We live and breathe vendor onboarding and fraud prevention. And we’re here to tell you: it’s time to rethink vendor due diligence from the ground up. This isn’t a compliance box to check anymore. It’s a strategic imperative for every organization that pays vendors.
Let’s dive into what’s changed, where the risks are hiding, and how to defend against a new generation of digital deception.
Table of Contents
Vendor Due Diligence Gaps: Why Onboarding is a Top Fraud Target
Where Traditional Vendor Due Diligence Falls Short
Redefining Vendor Due Diligence in the AI Age
The Role of a Vendor Management Platform in Vendor Due Diligence
Vendor Due Diligence Is a Strategic Imperative
Get Ready for Vendor Management Day 2025
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Vendor Due Diligence Gaps: Why Onboarding is a Top Fraud Target
Ask most people what cybercrime looks like, and they picture a hoodie-wearing hacker brute-forcing their way into a firewall. But modern fraudsters know there’s a much easier way in: just get invited.
Enter vendor onboarding. This phase poses a huge vulnerability in many organizations’ financial processes. Why? Because it involves gathering sensitive information like bank details, tax IDs, business licenses, and contact information. Moreover, this data is often shared over unencrypted emails, editable PDFs, or spreadsheets. It’s exactly the kind of soft target fraudsters dream of.
If a criminal can intercept or impersonate a vendor during this stage, they can redirect payments, create fake supplier profiles, or manipulate existing vendor records without triggering alarms. There’s limited visibility, weak verification protocols, and high-value data moving through insecure channels. It’s the perfect storm.
Real-World Examples
This isn’t theoretical. It’s already happening.
Case 1: Deepfake video scam
In 2023, a multinational firm lost over $35 million after a fraudster used AI-generated video and voice technology to impersonate a senior executive during a live video call. The finance team, thinking they were receiving direct instructions, authorized a transfer. The funds were gone in minutes.
Case 2: BEC at a university
A U.S.-based university transferred over $11 million to a fraudulent account after receiving an email, seemingly from a known construction vendor, requesting a banking update. The email used a lookalike domain and appeared legitimate. It wasn’t.
Case 3: Voice clone attack on city government
In another chilling example, a city government was tricked into updating vendor payment details after receiving a phone call from what they believed was a long-time supplier. The voice matched. The request made sense. But it wasn’t real. It was a voice clone.
These incidents aren’t one-offs—they’re early indicators of a systemic shift. Fraudsters aren’t just adapting. They’re innovating.
Where Traditional Vendor Due Diligence Falls Short
Most organizations think they’re covering their bases when it comes to vendor onboarding. They do some paperwork, manage a callback, maybe send an email confirmation. But in today’s environment, those legacy methods are little more than a false sense of security. Here’s where traditional due diligence breaks down and how those gaps are being exploited.
Manual processes lack verification controls
Many organizations still onboard vendors through a series of outdated, manual processes: sending and receiving W-9s via email, updating banking details in spreadsheets, and verifying changes with a phone call.
Here’s the uncomfortable truth: these processes are built on trust, not verification. Anyone can submit a form. Anyone can send a change request. And today, anyone can convincingly pretend to be someone else.
This leaves a wide-open door for fraud. Without automated verification systems in place, there’s no reliable way to confirm that the person or entity submitting sensitive data is legitimate. And when things go wrong, there’s often no clear audit trail to follow.
Caller ID spoofing & email impersonation
Think your team is safe because they “always call to verify”? Think again.
Caller ID spoofing allows fraudsters to manipulate how their number appears on your phone. It can look like it’s coming from a legitimate contact, even someone in your own organization. Combine that with AI-powered voice cloning, and you’ve got a recipe for near-perfect deception.
Email fraud has taken a similar leap forward. Lookalike domains, compromised vendor accounts, and polished AI-generated language make fake emails virtually indistinguishable from the real thing. Fast-paced departments, especially in finance and procurement, are particularly vulnerable when pressured to meet payment deadlines.
Lack of a centralized audit trail
If a vendor’s bank account information changes tomorrow, can your organization trace:
- Who submitted the change?
- How it was verified?
- Who approved it?
If the answer requires digging through emails, Slack messages, or spreadsheets, that’s a risk.
A centralized, tamper-proof audit trail isn’t just a “nice to have.” It’s critical for forensic analysis after a breach, for demonstrating compliance to regulators, and for establishing trust with internal stakeholders. Without it, you’re operating blind.
Redefining Vendor Due Diligence in the AI Age
If the old methods aren’t working, what should due diligence look like now? The answer lies in rethinking your entire approach. It starts with collecting data, but it’s really about validating identities, securing workflows, and using technology to detect red flags before they become losses. Here’s what a modern, AI-ready due diligence process must include.
Identity verification must be built-in
Security can’t be an afterthought. It has to be integrated into the core of your onboarding process.
Next-generation due diligence starts with built-in identity verification. That means:
- TIN Matching: Does the Taxpayer Identification Number match the legal name on file?
- Bank Ownership Validation: Is the bank account actually owned by the business claiming it?
- Business Registration Checks: Is the vendor’s business entity active, registered, and in good standing?
These checks must happen before a vendor is added to your ERP system, not afterward. Think of it as the digital version of “know your customer.” If you don’t validate upfront, you’re gambling every time you send a payment.
Secure, centralized vendor portals
One of the simplest ways to stop email-based fraud? Get out of email.
A secure, authenticated vendor portal allows vendors to submit sensitive information directly into your system. No PDFs. No spreadsheets. No email threads with questionable attachments.
Portals also standardize the experience, reduce back-and-forth, and improve data hygiene. And because every action is logged, you gain full visibility into who did what, when, and how.
It’s a cleaner, safer, and more professional way to operate.
Immutable audit trails
An effective due diligence process leaves a trail: a time-stamped, tamper-proof record of every interaction.
These immutable audit logs serve multiple purposes:
- Internal Investigations: Quickly pinpoint when something went wrong
- Regulatory Audits: Demonstrate compliance with standards and internal controls
- Insurance Claims: Prove you followed proper protocols if fraud occurs
It’s not just about security. It’s about credibility.
Proactive risk signals
Advanced due diligence doesn’t stop at validation. It uses AI to proactively monitor vendor behavior and flag anomalies.
Look for systems that can detect:
- Multiple recent changes to bank details
- Business name mismatches with IRS or Secretary of State data
- Suspicious domain names or newly created email addresses
- Activity from high-risk regions or IPs
- Transactions outside typical patterns
These risk signals allow your team to slow down and ask questions before the money leaves your account.
The Role of a Vendor Management Platform in Vendor Due Diligence
Having the right strategy is one thing. Implementing it across teams, systems, and processes? That’s another challenge entirely. This is where a dedicated Vendor Management Platform (VMP) becomes critical. It facilitates better due diligence. Let’s explore how.
Prevention over detection
Too many fraud prevention tools focus on detection after the fact. By the time you realize something’s wrong, it’s often too late.
A Vendor Management Platform (VMP) flips this model by intervening before fraud enters your system. It ensures:
- Secure data collection
- Real-time identity and bank validation
- Centralized storage of vendor data
- Role-based access and approvals
In short, it’s your first and best line of defense.
Supporting compliance and security goals
A VMP doesn’t just prevent fraud. It aligns your organization with broader compliance and IT security goals.
Think:
- COSO/SOX internal control frameworks
- Nacha rules for ACH fraud protection
- Audit readiness documentation
- Cybersecurity posture around data access and hygiene
It’s a security and compliance powerhouse.
Vendor Due Diligence Is a Strategic Imperative
The rise of AI-powered fraud and deepfake technology is a strategic threat to every organization managing third-party relationships.
Vendor due diligence must evolve. The old ways (think: emails, PDFs, manual callbacks) have to go.
But the path forward is clear.
With the right tools and processes, organizations can:
- Prevent fraud before it starts
- Modernize their vendor onboarding workflows
- Protect sensitive financial data
- Demonstrate compliance with evolving regulations
- Build trust across departments and with external partners
At PaymentWorks, we believe trust should be earned and verified. That’s why we help organizations secure their vendor onboarding and payment processes from the inside out.
Let’s not wait for the next headline to be ours. Let’s stay ahead of the curve together.
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 Vendor Due Diligence?
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Nacha’s Upcoming Rule Change: What You Need to Know
The Case for Automating Third-Party Risk Management: Costs, Risks, and ROI
Cleaning Up Vendor Information Management for 2025
Vendor Verification: How NOT to Do it and What to Do Instead
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