The Hidden Threat: Supply Chain Fraud – Why We Need to Talk About It Now

Getting a product onto the shelf or delivering a service to the end user is no longer just a matter of “logistics.” Supply chains represent a multi-layered network of relationships and data—spanning procurement, warehousing, transportation, quality, contracting, and payment processes. As this network expands, efficiency increases; but so does risk. Based on our on-the-ground experience in Türkiye through fraud investigations and fraud risk management engagements, we can state this clearly: Supply chains have become one of the areas where fraud is easiest to commit—and easiest to conceal..

This article is intended to introduce Cerebra’s whitepaper, “The Hidden Threat: Supply Chain Fraud,” and to summarize its key messages in an accessible way—without drowning the reader in technical jargon. Because supply chain fraud is not only a concern for finance teams; it must be a shared priority for operations, procurement, legal, compliance, and senior leadership.

Why Are Supply Chains So Vulnerable to Fraud?

Fraud often starts with intent—but it grows through opportunity. Supply chains provide fertile ground for opportunity: they involve many actors, processes are geographically dispersed, outsourcing is widespread, and information asymmetry is high. In other words, no one can see everything at the same time. This makes it easier for certain transactions to be hidden within routine operations.

Based on our experience in Türkiye, we frequently observe another key dynamic: in order to “move faster,” organizations adopt practical workarounds. Manual steps increase, approval chains get shortened, and the mindset of “we’ll fix it later” becomes normal. This is exactly the environment fraud needs—limited visibility, weak traceability, and unclear accountability.

Through Which Doors Does Fraud Enter?

Supply chain fraud does not fit into a single category. As highlighted in the whitepaper, risk can surface at every stage of the chain—from raw material procurement to returns processes. The most common scenarios typically fall into the following clusters:

• Supplier relationships and procurement: conflicts of interest, bid rigging, misleading bidding structures, bribery/kickback demands, and falsified certificates of origin.
• Invoicing and payments: invoice inflation, fictitious invoices, improper returns/discounts, and payment manipulation.
• Logistics, warehouses, and inventory: inventory inflation, deliberate mis-shipments, transportation fraud, and misappropriation of scrap/raw materials/finished goods.
• Product and quality: acceptance of substandard goods, counterfeit products, manipulation of quality assurance processes, and intellectual property theft.
• Ethical and legal violations: human rights breaches, child labor, and violations of anti-bribery and anti-corruption requirements.

This picture tells us something important: supply chain fraud is not the “problem of one department.” A weakness or control gap does not only create financial loss; it disrupts operations, increases compliance exposure, and can escalate into significant reputational damage.

The Impact Isn’t Only Financial

In a fraud case, the first reflex is often to ask, “How much did we lose?” That is, of course, critical. But based on Cerebra’s casework and what we have repeatedly observed in Türkiye, the true cost often accumulates in less visible areas: disruption of production planning, erosion of trust with suppliers, investigation and legal costs, deterioration of cash flow, and even loss of customer and investor confidence. The whitepaper outlines these dimensions clearly across operational, financial, compliance, and reputational impact.

How Can We Detect It? What Do “Red Flags” Tell Us?

Fraudsters usually hide in “normal.” That is why detection depends on taking early signals seriously—small indicators that appear before a major incident emerges. Typical warning signs include unusually frequent purchases from a specific supplier, procurement at prices well above market, approvals being bypassed, or lifestyle patterns that are inconsistent with an employee’s income.

The good news is this: in digitalized processes, every action leaves a trail. Anomalies in spending data, recurring transactional patterns, user access logs… When examined through the right lens, these traces become powerful evidence—not only for detection, but also for reconstructing facts retrospectively and building a defensible case.

Prevention Is Possible: A “Simple but Disciplined” Approach

Preventing supply chain fraud does not require revolutionary changes, but it does require systematic discipline. The framework proposed in the whitepaper aligns closely with the areas where we have seen the greatest impact, based on our experience in Türkiye:

• Risk-based controls and traceability
• Transparency and due diligence in supplier selection
• Supplier risk rating and continuous monitoring
• Audit rights, sanctions, and termination clauses in contracts
• Whistleblowing mechanisms open not only to employees but also to third parties
• Segregation of duties and the “three lines of control” logic
• Process automation and preservation of digital trails
• Selecting the right people for critical roles and monitoring behavioral indicators

A small but important note: “Compliance now starts in the supply chain.” Organizations are increasingly held accountable not only for their own employees, but also for the actions and outcomes generated by their business partners across the value chain. This is why third-party risk management and due diligence are no longer optional “good practice”. They have become a strategic necessity.

What Does the Whitepaper Offer?

Cerebra’s whitepaper provides a holistic perspective on supply chain fraud—its drivers, common typologies, and practical approaches to detection and prevention. It also presents two case analyses showing that fraud often involves internal–external collusion, and that with the right investigative approach, it is possible both to establish accountability and, in some cases, to pursue recovery of losses.

If you want to strengthen your supply chain not only in terms of cost and delivery performance, but also through the lenses of ethics, compliance, transparency, and fraud risk, this whitepaper is an excellent starting point. Based on our on-the-ground experience in Türkiye, Cerebra supports organizations in making these risks visible—and in managing them effectively.

Please click the link to review and download the report details.