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CREDITORWATCH FOUNDER RETURNS TO STOP FAKE INVOICE SCAMS

James EyersSenior Reporter
Nov 29, 2021 – 2.00pm
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The man behind credit reporting agency CreditorWatch has closed a funding round
for his new venture PayOK, which uses open banking data to prevent a growing
scourge of payment redirection scams, currently costing Australian businesses
more than $100 million a year.

Colin Porter has raised $3 million in an oversubscribed Series A capital
raising, to expand the fintech start-up PayOk, with the fledgling venture valued
at $10 million and already employing a team of 20.

Colin Porter, founder and CEO of PayOK, says BEC scams are often unreported.  

The cornerstone investor was Nightingale Partners, which also backed Mr Porter’s
other two ventures: CreditorWatch, the challenger credit bureau he co-founded in
2011; and Avenue Bank, which received a restricted banking licence from APRA in
November and is the country’s newest bank.

Also known as business email compromise (BEC) scams, the payment redirection
trick involves impersonating someone via email to intercept an invoice and
requesting that it be paid into the scammer’s bank account.

BEC is the most costly scam for businesses in Australia, resulting in $132
million in losses in 2019, according to the ACCC’s Targeting Scams report.



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Despite the scale of the problem, Mr Porter said the crime often went
unreported.

“This is because it is an embarrassment for companies when they make the
fraudulent payment,” Mr Porter said.

“There is no recourse for them, and they have to pay twice.”

The scam is made possible because banks’ legacy IT systems don’t link up bank
account names with their account numbers. This means a fraudster can present a
fake invoice with the proper name but switch the account number.

If the customer authorises the payment, the loss rests on their shoulders, not
the bank.

Bank payment fraud came to prominence this time last year, when Levitas Capital
was forced to close when hackers breached its email system and redirected
payments by purporting to be the manager.


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The source of infection was a dodgy Zoom invitation which allowed malware into
the system and led the fund trustee and administrator to mistakenly approve $8.7
million in fraudulent invoices. This resulted in the largest investor in the
fund withdrawing their money, forcing it to close.

But Levitas is not alone: more than 3300 incidents of BEC were reported to the
Australian Cyber Security Centre via its cyber reporting portal in the past
year; almost half of cases resulted in losses.


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“There is a range of fraud occurring at the moment, but the most common is
payment redirection,” Mr Porter said.

“There is no marrying up of names and account numbers so if you were making a
payment to somebody, you could put Mickey Mouse as the account name, and it
would go through.”


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PayOK, a software platform that will create a network of businesses, and use the
open banking regime, to match account names and numbers. The system works by
blocking transactions when a wrong number is presented.

It can also monitor internal fraud, using credit bureau data.

In a world of real-time payments, Mr Porter said the risk of payments fraud will
increase because people won’t have time to notice and stop it before it occurs.

Nightingale director Lindsay Phillips said he was attracted to Mr Porter and
PayOK as he knows a company that was defrauded of $50,000 under a BEC scam, and
that he was “shocked how easy it was”.

He’s a former managing director at Lazard, which owned Dun & Bradstreet in
Australia, a member of the credit agency duopoly that was broken by
CreditorWatch, which introduced him to Mr Porter’s management style.

“He sees things that need fixing, but, way more importantly, he surrounds
himself with fantastic people, and in order to succeed, that is what you need,”
Mr Phillips said.

“He goes hard, has complete belief and faith in what he is doing, and he gets
things done.”

James Eyers writes on banking, fintech and technology. Based in our Sydney
newsroom, James is a former Legal Affairs and Capital editor for the Financial
Review Connect with James on Twitter. Email James at jeyers@afr.com.au
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