Monday, November 17, 2014

Bermuda Triangle? Perhaps. Fraud Triangle? 100% Certain!

It all comes down to three items. Opportunity- Motivation-Rationalization. I've worked for some large global corporations over the years. There really isn't much I haven’t seen. I still recall an out of town seminar where a seasoned employee showed up for training hung over, in a ski mask, shorts, and wearing rollerblades. It was winter! I was thinking of a gentleman that I shall simply call Ron. This time it was summer.  Ron was an Account Executive working with me in a large global telecom company. We were just handed our shiny new corporate Visa cards, and given a crash course in what was allowed and not allowed to be put on the card. It was 1999 and not every company was up to speed on why they needed to automate their expense programs. In fact, many companies both large and small still use manual entry and paper even now. Shocking I know.


Let’s get back to Ron. During our business training trip, Ron decided that he no longer liked the swim trunks he brought and would purchase another pair on his corporate Visa. He also felt that it was not an issue to take out a few people in the training class for drinks and dinner….on the corporate Visa card. As he returned the room that evening, he explained that it was not big deal because companies never catch these items. Strange as it seemed, he was never even asked about the charges. I was shocked. It was not until a Manager overheard him explaining how he put winter tires on his personal vehicle with his corporate card, that he was found out and let go. That was a year later. In his defense, he had more of a case for snow tires that he did for swim trunks, but it mattered not in the end. 

Obviously this was long before I was in the T&E space, but I think back to those moments often  when I speak to a company who is relying on the folks in the back office to examine each expense report line item and look for policy breaks. I think back every time someone in a company tells me that they don’t have fraud issues at all.

The fact is that T&E fraud accounts for 14.5% of all fraud in a company.  In fact, JP Morgan reported that Travel & Entertainment  spending is currently at $156 billion annually and is expected to reach $186 billion annually by 2015. Middle market companies were responsible for the largest growth in T&E spending since 2008 at 9.7%. Applying statistics on fraud losses and expense reimbursement fraud losses to the current T&E spending, it is estimated that over $1 billion is lost each year to fraudulent expense reimbursement.  


Perception is reality. Another employee was known as “Two Dinner Joe”. He would order two dinners to go. Sounds simple and honest right? Wrong. He would make sure they were not put through the system as takeout. On the receipt it would look as if he ordered them at the restaurant and ate there.  He would then expense the dinners as if he took out a potential client. In his mind, the company surely had the money to spare, so he and his wife ate on the company card a few nights a week at home.  Once again, no automation was in place, and he never got caught. While it may seem comical to some, it is theft after all. There is a reason why so many companies are automating their AP these days.


I know that these examples seem almost humorous, but in reality, it happens more than most realize. Contact us to learn how we can help. 

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