To deter financial loss, CFOs have to keep a pulse on expense fraud. And one great way to do that is to hear right from the employees committing the crimes.
Modern fraudsters are using more sophisticated tactics and going highly undetected, according to Chrome River’s 2019 Corporate Expense Fraud Survey. So, it’s time to go behind the scenes and see – straight from the employees carrying it out – what expense fraud looks like in today’s business world.
Here are the report’s key points that you can share with your team (and keep in mind any time you approve expenses) to limit expense fraud:
What does the typical fraudster at any company look like? Survey says:
- Age and gender: Males ages 18-34 were the most likely to commit expense fraud.
- Salary: When looking at household income, those bringing in less than $50K per year were the biggest fraud group.
- Method of submission: Employees who submit expenses to A/P manually (e.g., paper receipts and spreadsheet expense reports) were more likely to commit fraud.
As CFO, you know employees of all kinds are out there lining their pockets, but it can be helpful for A/P to keep this profile in mind when conducting audits. If your team includes expense reports from employees with some or all of these characteristics, it could increase their odds of catching fraud.
Now you know who’s most likely to dip into your company’s coffers. How are they carrying it out? In a nutshell, they’re adding small expenses time and time again:
- Amount: Most fraudulent expenses (68%) were under $50.
- Frequency: Over two years, 63% of employees submitted between two and 10 fake expenses.
- Type: The top expense types were extra mileage (39%), personal purchases recorded as biz expenses (34%) and inflated tips (28%).
You can guess why sneaky employees tend to opt for these methods. They’re easier to carry out, and they don’t raise suspicion in A/P the way larger dollar amounts would, Chrome River points out. In turn, these employees see no reason to stop. A whopping 85% say they’ve never been caught and 47% are still falsifying expenses.
So, remind your team to watch lower-value expenses, especially now as employees are submitting little things for remote work, like office supplies. If your team can catch ’em once, they could prevent repeat fraudulent occurrences in the future.
What’s often most tricky to see is why employees steal, since everyone has a unique thought process. But there are some common threads.
Right now, most fraudsters are looking to even the score. The top reason cited for committing expense fraud was “to make up for other small expenses I couldn’t submit for reimbursement” (45% for both men and women). Many also feel they deserve it for all the travel/late nights (13% for men, 10% for women).
Due to the pandemic, employees are working all kinds of hours and facing lots of new circumstances. They may have taken a temporary pay cut or seen their commissions take a large hit. As a result, some employees could see expense fraud as a way to help make up for the losses.
Of course, there’s no excuse for fraud. But companies have to be especially sensitive to and aware of the current climate. You want to ensure employees don’t feel like they’re being gypped and take matters into their own hands. And as always, make sure your corporate culture advocates that any amount of fraud – no matter how small – has serious consequences.