diff --git a/src/__tests__/invoiceVerification.test.js b/src/__tests__/invoiceVerification.test.js
new file mode 100644
index 0000000..8e881eb
--- /dev/null
+++ b/src/__tests__/invoiceVerification.test.js
@@ -0,0 +1,55 @@
+const { verifyInvoice } = require('../services/invoiceVerification');
+
+describe('Invoice Verification Service', () => {
+  it('should verify a valid invoice', async () => {
+    const payload = { amount: 5000, customer: 'Acme Corp' };
+    const result = await verifyInvoice(payload);
+    expect(result).toEqual({ status: 'VERIFIED' });
+  });
+
+  it('should reject if payload is not an object', async () => {
+    const result = await verifyInvoice(null);
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Invalid payload structure' });
+    
+    const result2 = await verifyInvoice('string');
+    expect(result2).toEqual({ status: 'REJECTED', reason: 'Invalid payload structure' });
+  });
+
+  it('should reject invalid amount types', async () => {
+    const result = await verifyInvoice({ amount: '5000', customer: 'Acme Corp' });
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Invalid amount: must be a positive number' });
+  });
+
+  it('should reject zero or negative amounts', async () => {
+    const resultZero = await verifyInvoice({ amount: 0, customer: 'Acme Corp' });
+    expect(resultZero).toEqual({ status: 'REJECTED', reason: 'Invalid amount: must be a positive number' });
+
+    const resultNegative = await verifyInvoice({ amount: -100, customer: 'Acme Corp' });
+    expect(resultNegative).toEqual({ status: 'REJECTED', reason: 'Invalid amount: must be a positive number' });
+  });
+
+  it('should reject invalid customer types', async () => {
+    const result = await verifyInvoice({ amount: 5000, customer: 12345 });
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Invalid customer: must be a non-empty string' });
+  });
+
+  it('should reject empty customer string', async () => {
+    const result = await verifyInvoice({ amount: 5000, customer: '   ' });
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Invalid customer: must be a non-empty string' });
+  });
+
+  it('should reject an amount exceeding the maximum allowed threshold', async () => {
+    const result = await verifyInvoice({ amount: 15000000, customer: 'Acme Corp' });
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Amount exceeds maximum allowed threshold' });
+  });
+
+  it('should require manual review for high value invoices', async () => {
+    const result = await verifyInvoice({ amount: 1500000, customer: 'Acme Corp' });
+    expect(result).toEqual({ status: 'MANUAL_REVIEW', reason: 'High value invoice requires manual approval' });
+  });
+
+  it('should reject customers with suspicious characters (XSS/Injection)', async () => {
+    const result = await verifyInvoice({ amount: 5000, customer: 'Acme <script>' });
+    expect(result).toEqual({ status: 'REJECTED', reason: 'Suspicious characters detected in customer data' });
+  });
+});
diff --git a/src/index.js b/src/index.js
index 2e3d76c..5f16f08 100644
--- a/src/index.js
+++ b/src/index.js
@@ -25,6 +25,7 @@ const errorHandler = require('./middleware/errorHandler');
 const { callSorobanContract } = require('./services/soroban');
 const AppError = require('./errors/AppError');
 
+const app = express();
 const PORT = process.env.PORT || 3001;
 
 // In-memory storage for invoices (Issue #25).
diff --git a/src/index.test.js b/src/index.test.js
index a565483..32f93e7 100644
--- a/src/index.test.js
+++ b/src/index.test.js
@@ -116,9 +116,20 @@ describe('LiquiFact API', () => {
       expect(response.body.data).toHaveProperty('id');
       expect(response.body.data.amount).toBe(1000);
       expect(response.body.data.customer).toBe('Test Corp');
+      expect(response.body.data.status).toBe('VERIFIED');
       expect(response.body.data.deletedAt).toBeNull();
     });
 
+    it('POST /api/invoices - creates a rejected invoice if verification fails', async () => {
+      const response = await request(app)
+        .post('/api/invoices')
+        .send({ amount: -500, customer: 'Shady Corp' });
+      
+      expect(response.status).toBe(201);
+      expect(response.body.data.status).toBe('REJECTED');
+      expect(response.body.data.verificationReason).toBe('Invalid amount: must be a positive number');
+    });
+
     it('POST /api/invoices - fails if missing fields', async () => {
       const response = await request(app)
         .post('/api/invoices')
diff --git a/src/services/invoiceVerification.js b/src/services/invoiceVerification.js
new file mode 100644
index 0000000..e9a68b4
--- /dev/null
+++ b/src/services/invoiceVerification.js
@@ -0,0 +1,66 @@
+/**
+ * Invoice Verification Service
+ * Handles fraud checks and business validation before invoice approval.
+ */
+
+/**
+ * Result of an invoice verification.
+ * @typedef {Object} VerificationResult
+ * @property {string} status - The resulting status: 'VERIFIED', 'REJECTED', or 'MANUAL_REVIEW'.
+ * @property {string} [reason] - The reason for rejection or manual review, if applicable.
+ */
+
+/**
+ * Validates an invoice for fraud and business rules.
+ * 
+ * Security Assumptions:
+ * - The input payload must be an object.
+ * - `amount` must be a strictly positive number.
+ * - `customer` must be a non-empty string avoiding potentially malicious injection patterns.
+ * 
+ * @param {Object} invoicePayload - The invoice data to verify.
+ * @param {number} invoicePayload.amount - The invoice amount in the system's base currency.
+ * @param {string} invoicePayload.customer - The customer identifier or name.
+ * @returns {Promise<VerificationResult>} Returns the verification status and optional reason.
+ */
+async function verifyInvoice(invoicePayload) {
+  if (!invoicePayload || typeof invoicePayload !== 'object') {
+    return { status: 'REJECTED', reason: 'Invalid payload structure' };
+  }
+
+  const { amount, customer } = invoicePayload;
+
+  // Security: strict type and value checks
+  if (typeof amount !== 'number' || Number.isNaN(amount) || amount <= 0) {
+    return { status: 'REJECTED', reason: 'Invalid amount: must be a positive number' };
+  }
+
+  if (typeof customer !== 'string' || customer.trim() === '') {
+    return { status: 'REJECTED', reason: 'Invalid customer: must be a non-empty string' };
+  }
+
+  // Business Validation: Fraud Check Example
+  // Reject absurdly high amounts automatically
+  if (amount > 10000000) {
+    return { status: 'REJECTED', reason: 'Amount exceeds maximum allowed threshold' };
+  }
+
+  // Business Validation: Manual Review Example
+  // Require manual review for high value invoices
+  if (amount >= 1000000) {
+    return { status: 'MANUAL_REVIEW', reason: 'High value invoice requires manual approval' };
+  }
+
+  // Security: Check for obvious injection patterns in customer string
+  const suspiciousPatterns = /[<>{}$]/;
+  if (suspiciousPatterns.test(customer)) {
+    return { status: 'REJECTED', reason: 'Suspicious characters detected in customer data' };
+  }
+
+  // Verification passed
+  return { status: 'VERIFIED' };
+}
+
+module.exports = {
+  verifyInvoice
+};