Fraud prevention is undoubtedly essential as individuals, organisations, and nations increasingly adopt digital solutions. Starting 1 September 2025, the UK Government introduced part of the Economic Crime and Corporate Transparency Act (2023), making it a criminal offence if companies do not take measures to prevent fraud. The European Anti-Fraud Office, or OLAF, is actively involved in drafting and negotiating legislation for protecting the European Union against fraud and corruption.

But while the onus should be on governments and regulatory bodies to lay out the rules, it’s up to individual organisations to develop fraud prevention and detection solutions for organisations to implement. To learn more, Mahika Ravi Shankar, Deputy Editor at Trade Finance Global (TFG), spoke with Federico Avellán Borgmeyer, Chief Partner Officer of factoring software provider efcom at the 2025 Sibos conference in Frankfurt, Germany. At efcom, AI is “part of the DNA of the company,” said Borgmeyer.

Traditional methods of fraud prevention have historically been disastrous. Consider, for instance, the Lehman Brothers Repo105 fraud case, which was pivotal in their downfall. Borgmeyer pointed out that “everyone […] didn’t really pay attention to what was happening inside that company.” Allegedly, many within Lehman Brothers Inc. turned a blind eye to their overexposure to risky mortgage-backed securities and untenable leverage. 

Not many businesses have moved on from a culture of sweeping denial and ignorance. Avellon suggested that many companies continue to follow outdated modes of fraud prevention. 

Such is true when looking at the collapse of London Capital & Finance (LCF) in 2019; LCF faced similar accounting troubles, which led to its demise. Two out of three auditors who were fined for the mismanagement of LCF were PWC and EY. The Financial Conduct Authority’s (FCA) own investigations concluded that there were some shortcomings on behalf of the FCA in regulating the conduct of LCF adequately. 

Solutions like those provided by efcom aim to move away from older methods of risk detection and instead turn to something “more up to date, (more) real time,” said Borgmeyer.

Blind spots 

Borgmeyer discussed the fast-moving nature of internal data assessments – even real-time data becomes “historic” by the time it’s assessed.

“Blind spots are everywhere in an organisation”, he claimed. “ If we look into factoring, where a factor purchases receivables from an individual, from an organisation, from a company… one of the blind spots that you have is: how real is this particular receivable? Is it a result that’s authentic? Is there any substance in it?”

There are several instances where the authenticity of a receivable can be reasonably questioned, such as data credibility, real-time capture issues, and who the debtor actually is. These represent various risks shared among all involved parties. The risk that many factors face is inherent in the very nature of the service they provide. 

According to Borgmeyer, “dilution is an important blind spot in factoring […] the difference between 100 and any other value below is the dilution. And if that happens regularly, frequently, often, then you’re not doing the business that you should be doing in factoring.” 

In the US, this has garnered recent momentum – the recent M Design Vill. v. Versant Funding LLC case held that agreements should not occur to sell future or projected receivables, or face heavy scrutiny in bankruptcy courts.  Factoring is entering an era of transparency that can hopefully redress the associated costs of dilution. 

Factoring software and preemptive risk identification 

So, how do companies that manage large factoring volumes manage such risks?

“At efcom we process around €200 billion per year […] about 5% of the global factoring volume traded in finance,” highlighted Borgmeyer. By harnessing the power of machine learning (ML), our software can assess transactions in real-time and flag urgent issues within the “data in a factors ecosystem”. The real-time capacity of risk detection and fraud prevention is thanks to AI-based automation. 

ML-based models need both historic and modern KPIs to enhance the management of accounts receivable. Tracking the right metrics is a crucial part of the imperative foundation for factoring solutions. But ML is transcending its reliance on older data.

“When you use machine learning, for instance, as an instrument for predicting what’s happening in your ecosystem, then those particular KPIs may be irrelevant because our world is changing,” expressed Borgmeyer. Efcom’s use of AI is self-learning, meaning it automatically adapts in response to changing patterns and anomalies.

Future-proofing for compliance and regulation

The rollout of factoring software solutions calls for a shift in data privacy and compliance practices. 

“We have some ways of anonymising, if you like, the data from particular companies or individuals. You can use blockchain technology, hashing technology, things like that to make data intransparent for someone who looks at the data,” said Borgmeyer.

Blockchain usage is multi-dimensional, and could mitigate costs in invoice factoring by 40%. The reduced need for intermediaries and operational cost-cutting attest to the transformative nature of automated factoring solutions.

The impact on fraud prevention is twofold: firstly, an inimitable ledger; secondly, a sole source of authentic real-time data. Hopefully, this should prevent what has caused financial negligence and even malpractice.

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Detection solutions are indeed the future of fraud prevention: Avellon shows us how factoring software is evolving. 

The aim? To eliminate slow processing and operational inefficiency, making instant credit assessments and automated workflows the standard for the future.