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In today's highly globalized world, trustworthy supply chains are essential for the success of companies and business organizations. Due to complicated production processes and trade relationships, knowing your supplier is necessary. It allows business owners to monitor suppliers, prevent financial crimes, and avoid severe reputational damage and legal consequences. How does KYS help in fighting supplier fraud? How can you ensure that a vendor complies with KYS norms? What should you do in case of financial fraud? Let's talk about the KYS compliance guide in detail.
What Exactly is Know Your Supplier?
Simply put, KYS is a business practice in which companies verify suppliers. It allows them to handle supply chain risks properly, eliminate financial fraud, and deal with legal consequences.
In 2023, 96% of U.S. companies experienced at least one fraud attempt. Moreover, between 2013 and 2023, individuals and companies in the USA suffered losses of up to $20 billion due to fraudulent wire transfers done via scams like Business Email Compromise (BEC). Fifty-five percent of all companies reported that bogus suppliers requested a change in payment details. A sharp rise in supplier-side financial crimes (money laundering, tax evasion, identity theft, selling illegal goods/services, forged billing, etc.) makes it mandatory for all business organizations to verify suppliers.
How To Verify Your Supplier?
Always keep in mind that verifying suppliers is a time-consuming process. Before you sign a business contract with a particular vendor, it is very important to investigate their background, business expertise, production capabilities, product quality, certifications, financial stability, etc. Supplier Verification Process: Step-by-step Instructions
Invite Multiple SuppliersIt is beneficial if you communicate with multiple suppliers regarding the products you need and critically analyze their offers from all angles. Take your time to know their ownership details, products, and services, track records, etc. Make a list of potential suppliers you want to work with. It will help you conduct background checks in a proper sequence and choose the best supplier for your company.
Verify The informationSuppliers often make tall claims about their products and services when you contact them regarding your business needs. Don't trust their words blindly. Conduct a background check to confirm the legal standing and operational history of different vendors. If possible, take references from their previous customers and resort to third-party audits. Don't forget to evaluate the vendor's financial statements, credit ratings, operational capabilities, performance in the last 48 months, etc. All these will ensure that he complies with the industry standards and regulations in all circumstances.
Sign A Contract With The SupplierOnce you select a particular supplier for your company, create a business contract with all terms and conditions of the corporation. It must include partnership clauses, delivery schedules, payment modes, dispute resolution mechanisms, privacy agreements, key performance indicators, compliance metrics, etc. A formal contract will help you get high-quality products or services from the selected supplier and eliminate the chances of financial fraud.
OnboardingOnce you have a business contract with a particular vendor, onboard them into your company’s systems and processes. Let them know your company’s work culture and integrate systems. It will help you get the requested products or services on time and conduct your everyday business activities as usual.
Monitor The Supplier’s PerformanceYou need to keep monitoring the supplier’s performance on various parameters and provide the necessary feedback in real time. Strict surveillance will help you get high-quality products and services, as usual, every month and minimize the chances of financial fraud. You can use business management software for this purpose.
Extension Or Termination of Business ContractDepending on your experience with the particular supplier, you can extend or terminate the business contract.
What Are The Main Benefits of Supplier Due Diligence?
The proper implementation of KYS practices ensures that the vendor meets your company’s business standards. It will help avoid costly delays, errors, and product quality issues. It will also minimize operational inefficiencies and the chances of fraud.
Compliance With Standard Business PracticesAll companies must follow the established terms and conditions. KYS ensures the vendor follows the compliance norms. It will significantly decrease the chances of heavy penalties, sanctions, and other legal consequences against your company.
Risk ManagementWith KYS, you become aware of the potential challenges of working with a particular vendor and deal with them accordingly. If there is a violation of the established business practices, you can terminate the contract and protect your company from potential financial fraud. Fake invoices, billing blunders, exploiting lax approval processes, kickbacks, bribery, shortchanged shipments, hidden fees, etc., are some issues that must trigger action from your side and result in the termination of the contract.
Business Efficiency & GrowthThe proper implementation of KYS ensures the smooth availability of desired products and services to your company at the right time. It will allow you to conduct different business activities smoothly and register tremendous growth.
How To Fight Supplier Fraud?
Always remember that the desire to obtain rapid financial benefits motivates many suppliers to commit financial crimes and take the company's money away. It can happen in many ways, as explained above. Busy business people find it very difficult to constantly analyze the performance of suppliers and combat financial fraud themselves. If a supplier cheats your company financially, don't sit idle.
Be active, collect all the pieces of evidence of the scam, and contact us at Crystal Recoup. Our recovery experts will quickly examine your case, probe the financial crime as per the standard legal procedure, and try to recover the stolen money as much as possible. Our expert help will increase the overall effectiveness of the money recovery practices. You will be able to get the stolen money back fully or partially.
Conclusion
Fighting supplier fraud is essential in today’s complex and highly competitive business environment. It helps to ensure your company gets high-quality products and services as agreed with a vendor and minimizes the possibility of devastating scams. Crystal Recoup offers fraud detection and funds recovery services to all. Contact us if you encounter a financial crime committed by vendors. We will look into the matter and take all measures to recover the stolen money as much as possible.
