Limiting the hazard of travel and expense fraud

Travel and expense fraud probably remains one of the oldest, overlooked and most pervasive types of white-collar crime. Unclear guidelines or low awareness of this fraud can impact corporates adversely, and result in billions of dollars of revenue loss each year.

Typically, most companies design their travel expense reimbursement policies to meet standard audit and tax law requirements, instead of encouraging expense control or fraud deterrence. This can lead to either gaps or an extremely weak travel and expense control mechanism. The two most commonly seen expense fraud schemes tend to be either

  1. Employees claiming reimbursement for fictitious expenses or
  2. Inflating actual business expenses

However, companies can implement improved internal control mechanisms and mitigate such frauds. For instance, they can maintain a travel and entertainment expense policy and institute meaningful expense report approvals. Monitoring costs through continuous monitoring tools can help to detect misconduct and policy violations at an early stage.

Rising technology play to curb travel and expense fraud

Technology adoption and a subsequent uptick in online and digital fraud has led to a rapid rise in adoption of Forensic Data Analytics. Today, Forensic Data Analytics can be leveraged extensively, which includes assisting companies in monitoring, detecting and preventing unethical or fraudulent activities. Expense fraud can be detected and mitigated through Forensic Data Analytics’ machine learning algorithms. With little human intervention, and low expense and effort, such algorithms when exposed to new data, can spot behavioral patterns. The program can further learn to detect anomalies in patterns, including fraud patterns which may otherwise be overlooked. Clear policies, accompanied by automated expense management systems can lower the chance of companies falling prey to fraudulent expense report reimbursements.

For example, an aerospace and defense company based in Europe has over 50,000 employees worldwide. Their shared services center that typically reviews the travel and expense submissions of employees migrated to a single cloud-based expense processing and travel booking system. As a result, the company has a single source for each of these data sets now. It further applied analytics to these consolidated data sets to increase efficiency in their processes, management reporting and identified areas to optimize costs through policy enforcement.

For detailed information, please see EY Switzerland’s latest Fraud Newsletter

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