In discussions of economic crime, "manipulation of accounts" is often referred to as a method in general terms. It is important, however, to distinguish between lawful accounting adjustments, such as the use of judgement in capitalisation and measurement rules, and accounting adjustments that go beyond what is accepted under good accounting practice, which is completely fictitious: accounts that describe a business that has never existed in practice. Manipulated, fictitious accounts are a method of economic crime. Manipulated accounts give the impression of solid finances, but they paint a completely false picture of the business. It is therefore important to be able to distinguish between false accounts and the correction of accounts to give an accurate picture of a company's revenue.
In Norway we have seen more and more cases in recent years where companies have been taken over and entirely new accounts have then been filed for earlier years – completely fabricated. These accounts have shown apparently solid operations and growth, and in many cases they have been used to obtain credit. Since the end of 2024, however, we have seen a decline here: a decline in the retrospective filing of fictitious accounts.
"False accounts have been an important method for criminals to gain access to credit, often for building materials and car loans. The method is often combined with identity theft. That has serious consequences both for the victim of the identity theft and for society" says Lars Mamen, an expert on work-related crime at Fair Play Bygg Oslo og omegn.
Our assessment is that criminal operators have increasingly realised that retrospective changes to accounts are easier to detect than they used to be, thanks to better access to up-to-date data, automated anomaly analysis and sharpened attention from banks and lenders.
The graph above shows companies that have filed updated accounts with large improvements in operating profit for earlier periods, and then taken out loans on the back of them. The size of the changes makes us fairly confident that in these cases the changes were fictitious. From this we can see that filing accounts retrospectively as a fraud method is probably in sharp decline.
This does not mean the problem of fictitious accounts is solved. On the contrary: many of the accounts filed from now on are likely to be fictitious too. The difference is that they are not necessarily corrected retrospectively. Instead the fraudsters wait for the next ordinary filing, and then file accounts that are fictitious.
This tactical adjustment mirrors a well-known pattern in economic crime: when a method becomes too risky, it changes quickly.
"We at Fair Play Bygg have alerted both the Norwegian Tax Administration and the trade and finance sector to this method, and to specific sets of accounts that are fictitious" says Mamen, who goes on to explain: "Fortunately, it looks as though creditors have learned and have become cautious about granting credit to companies with fictitious accounts. But it has been an expensive lesson. Over the years, criminals have extracted enormous sums. My guess now is that businesses have avoided substantial losses over the past year by changing their credit assessments after Fair Play Bygg, working with Enin, alerted them to the dramatic increase in fictitious accounts being registered with Brønnøysundregistrene. The exact amount saved is hard to gauge, but I estimate it is a three-digit sum."
How do you detect well-hidden fraud?
Fictitious accounts that are not filed retrospectively are harder to uncover, because they look "fresh" and natural within the reporting rhythm. In such cases it is not enough to look at the accounting figures in isolation. You have to ask the question: does this set of accounts fit with the rest of the reality around the company?
This is where we at Enin believe intelligence-driven risk assessment makes the difference. We combine:
Continuous monitoring of company data, roles and structural changes
Automated flagging of anomalies and signals based on context, not just figures
Agile development processes, which let us launch new indicators quickly
As early as February 2024, Enin launched detection models for retrospectively filed accounts, and has since launched several more tools for finding possible fraud. We put significant resources into this. Fraud changes, and we have to keep improving in order to fight it.
Tomorrow's fraud will not be caught with yesterday's tools
Fighting accounting fraud effectively is not only about "crunching the numbers". It is about understanding how businesses actually operate, and when the picture of reality presented in the accounts does not add up.
At Enin we give banks, insurance companies and the public sector decision-making tools that help them ask the right questions quickly enough to act on the answer. Including when the fraud methods change.
