How Not to Commit Expense Fraud

Tim Wheatcroft
Tim Wheatcroft
Stock image of two young people looking at paperwork

Every so often a news story pops up about expense fraud. You’ve probably seen them: someone cooks up an elaborate ruse to deceive their employer out of tens of thousands of dollars, which they use to fund their extravagant lifestyle. 

In this instance, an analyst who specializes in financial crime - oh the irony -  for a major bank recently lost an unfair dismissal case, having been found to have inflated his expenses. But this wasn’t with fake invoices or fancy watches - it was with an unapproved meal purchase. And this wasn’t even a Wagyu steak, washed down with fine wine. The items in question were a coffee, a sandwich, and a bowl of pasta, costing less than €100.

It turns out that they were bought for, and consumed by his partner. The expense submitter expensed two coffees, sandwiches, and dinners, claimed that he’d consumed them all himself, submitted his expenses, and when asked, claimed that he dined alone. His manager challenged this when reviewing his expenses, and he eventually admitted that his partner dined with him, while accompanying him on a trip. Due to a combination of the initial receipt fraud, lying to his manager, and his specific role at the bank, his employment was terminated.

So while this individual was hoping his deception would go unnoticed, this case did bring up some interesting areas to consider in order to avoid falling foul of your expense policy. 

Avoiding accidental expense report fraud

  1. Daily allowance isn’t carte blanche: The employee claimed that because the expense was under his €100 daily allowance, it should be allowed. Incorrect - a daily allowance is a maximum that you need to stay within. It’s not a per diem allowance, where you are given a fixed amount in advance for food and can spend it how you wish. All spend needs to be accounted for and within policy in order to be reimbursed.

  2. Receipts don’t lie: Receipts contain a lot of information about the merchant, location, and type of transaction. Expense systems are becoming increasingly sophisticated in their ability to accurately identify and extract data, so it’s incredibly difficult to try and pass off one kind of purchase as something else. 

  3. Know your policy: If your organization’s expense policy states that you need to specify who is dining with you, and you submit more than one meal with only one diner, that will automatically raise a red flag.  And of course, it’s very unlikely that the policy will allow you to expense a partner’s dinner, so unless you have prior approval, that’s really not a good idea.

  4. Expense fraud isn’t just about taking money: Even if something is technically allowed within your policy (like a €100 meal allowance) it doesn’t mean that you can abuse the system and stay compliant. Similarly, if you’re allowed to get a cab from a work event, but decide to take the bus and then submit a cab receipt from another personal trip, that’s still banned.

  5. Human and technology-based auditing: Modern expense systems will automatically apply a set of rules to every expense as it’s submitted, to verify that it’s within policy. If the system catches something that it suspects is out of policy, it will ask the submitter for an explanation before it’s sent for approval. Even after submission, organizations use both human and technology-based auditing to spot out-of-policy and fraudulent transactions.

  6. Honesty is better late than never: If you do submit something that somehow slips through the cracks, and then realize that it’s outside of policy (or you deliberately submitted it and then got pangs of guilt), it’s far better to proactively inform. 

With expense management technology, it’s far easier to stay compliant with the policy (and if you’re trying to con your employer, it’s far harder to do that, too). It’s designed to guide you through the expense process, and will automatically flag if an expense appears to be out of policy - such as an item being above an approved limit, or a meal missing attendees’ names. The overwhelming majority of expense submitters are honest, and out-of-policy submissions are generally inadvertent, so an expense management solution can give great peace of mind, as well as make the T&E process simpler. 

Of course expense management platforms are not the only way that companies are able to prevent expense fraud. Whether it’s equipping teams with corporate cards that enforce the expense spending rules at the point of purchase, or integrating the expense system with the travel booking platform to keep all trip purchases within policy limits, organizations have plenty of tools at their disposal.

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