The Fraud Examiner

How Invoice Fraud Can Hit Organizations of Any Size

Ron Cresswell, J.D., CFE
Research Specialist, Association of Certified Fraud Examiners                                 

Amazon is one of the world’s largest and most successful companies, with nearly unlimited resources and cutting-edge technology embedded into every aspect of its business. And yet, as we learned last month, Amazon was defrauded out of $19 million by a relatively unsophisticated invoice fraud scheme perpetrated by four brothers in New York. If Amazon can be duped by invoice fraud, other companies should take note. 

The Amazon invoice fraud scheme

In late August, the U.S. Department of Justice (DOJ) issued a press release detailing a fraudulent invoice scheme in which four brothers used manipulated invoices and unauthorized product substitutions to defraud Amazon out of millions of dollars. According to the DOJ, the brothers attempted to obtain approximately $32 million from Amazon and actually obtained approximately $19 million.

To understand the brothers’ scheme, it is necessary to understand Amazon’s purchasing system. 

For some consumer goods with modest sales volumes, Amazon buys the goods from third-party wholesalers or retailers rather than keeping the goods in stock. A business that wants to sell goods wholesale to Amazon must apply to become a vendor, obtain approval and then register an online vendor account with Amazon. 

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