How to Spot Expense Fraud

The Bizarre and Bogus Expense Claims Our Auditing Team Have Stopped 

Every expense approver has raised an eyebrow at expense claims that don’t seem quite right. From fictitious trips and inflated costs to duplicated receipts and claims made for former employees, we have heard all the best stories. While some claims may be laugh-out-loud funny, the business outcomes might not be.

Can your finance team distinguish a fraudulent expense claim from a genuine mistake? Some whoppers are easy to spot, some not so obvious, but for the person responsible for the future financial health of a business, catching rogue expenses is more important than ever.

Before we look at how to prevent money slipping through the cracks, with the help of an intelligent spend management platform, let’s look at some of the more unusual expense claims we’ve encountered.

Mixing business with pleasure 

The lines between personal and business expenses have always been easily blurred, more so now that home working is so common. You might use a Spotify subscription to provide a relaxing or uplifting musical backdrop to the working day, but if it's not solely used for work, it's unlikely to gain approval as a work expense.

Exaggerating the business aspect of a “trip” is a common way to expense what is, in all honesty, a holiday. We've heard of expense claims for designer handbags and expensive watches deemed necessary to promote a professional image.

One employee submitted receipts for multiple personal Amazon orders including make-up, clothing, perfume and toiletries but doctored them to make it look like the orders were office supplies and stationery. Another submitted a suspicious claim for a €1,150 annual contribution to a private and social dining club.

Let’s run through some of the other ways employees may try to get spurious claims over the line when they submit expense reports – and what you can do to detect their attempts.

Fake it until you make it

Editing a receipt for meals, transportation, office equipment or accommodation by doctoring the date, amount or product are common fraud techniques.

Some employees can be tempted to go further and create fake receipts from scratch using various techniques, such as ChatGPT. Employees can create AI-generated photo-realistic receipts, complete with logos, stains and creases, and even bogus travel tickets in minutes, making fakes harder than ever to spot. However, as well as being used to create bogus expenses, AI can also help to detect possible fakes.

Some of the things you need to keep your eagle eyes out for:

• Fake receipts that mimic the format of legitimate receipts but contain false information. Watch out for handwriting or typing a new amount, item or date over the correct, printed one.
• Falsified mileage logs to claim reimbursement for distances not actually travelled or for personal trips disguised as business travel.
• Altered invoices from suppliers or service providers to inflate the costs of goods or services purchased for business purposes.

Double take 

This is one that comes round again and again in the approval process – why expense for a business trip once when you can submit twice? One fraudster tried to submit the same receipt in two different expense reports, with identical details such as date, table number, service number, operator and guest names – but at a different time.

Here’s what else you need to look for:

• Submitting a duplicate expense claim with the same receipt – perhaps one as an e-receipt, one as paper.
• Uploading the same receipt twice in different line items in one report.
• Changing one small detail on an expense claim, such as time or table number, to make it appear like a different claim. A different font size can be a giveaway.

Back to school: 2 + 2 = 5

A sure-fire way to know if the expense might be bogus is if the numbers don’t add up. There might be inconsistencies between the submitted receipts and the actual costs associated with the item, trip or meal. An employee might have overinflated expenses to cover personal expenses. Artificial intelligence (AI) is a useful tool when it comes to flagging anomalies and trends that, in rare cases, might be undetectable by human auditors at a quick glance.

Things to watch out for include:

• The combined amount of the expense claim amount doesn’t match the individual item price multiplied by the quantity.
• The same receipt has been used for multiple expense claims – e.g. multiple parking tickets, but only one receipt.
• Item costs that seem over-expensive for what they are. Does a taxi from Nottingham to Derby really cost £300?

Hiding in plain sight 

Nobody appreciates being caught off guard by a "hidden extra". Whether it’s a hefty service charge, astronomical upgrade fee or a surprise penalty for late payment, they can be hard to avoid. So, what happens when an employee tries to sneak a little extra something through their expense claim? Any employee doing this will be liable for the non-compliant expense claim.

Here are some examples of employees not being quite upfront about their expense claims:

• Creating a new expense report but using an old receipt to allow an out-of-policy hotel.
• Adding on an enormous tip – for example, an expense claim for an item costing £2.72 submitted with a £130.000 tip.
• Resubmitting a report with the same receipt but two very slightly different amounts – for example, one that was for £58.60 and one that was £59.60.

 

Picture this - not that! 

They say a picture paints a thousand words but what if none of them are relevant to your expense claim? Trying to submit expenses when you're in a hurry or distracted can lead to mistakes and inaccuracies.

To prove their locations, one user uploaded a photo of their assembled, smiling colleagues in situ, whilst another decided to send a photograph of their office table and chairs rather than a picture of their receipts.

ExpenseIt is a receipt scanning app that automatically turns photos of receipts into expense line items which are then added to a new or existing claim. This reduces manual entry time and the likelihood of making errors when rushing to submit expenses and not really paying attention.

Now for the serious bit

While these stories provide light relief from the sometimes frustrating and tedious task of expenses, there are serious implications for your business that, if not addressed, could impact your profitability. 

Aim to create a culture of ethics and compliance that deters potential fraud cases. Be clear about the possibility of being caught and the disciplinary measures that are in place for intentional or repeat offenders, if it's not a genuine one-off mistake.

Prevention is better than cure and we recommend a process checklist, which includes questions such as:

• Does credit card data seamlessly integrate into your expense tools? 
• Is there a requirement for e-receipts above a specified spending threshold? 
• Are automated audit rules in place to enforce checks and balances? 
• Do you have an impartial, external audit program to help oversee and control spending?

If you answer no to any of these questions, it might be time to review how your organisation detects and prevents fraud.

Technology: Friend AND foe of fraud

While technology can help employees commit fraud more easily, it also plays a key role in identifying and preventing it. AI can be your best buddy or your biggest bugbear when it comes to expense fraud, but you'll need it on your side to stay ahead.

Consider that in the past, employees could fill out a blank receipt for a taxi ride and easily make a false claim. Today, an Uber ride supplies an e-receipt.

For mileage expenses, which can traditionally be frustrating to track and easy to inflate, the SAP Concur mobile app, combined with GPS tracking features in our Drive solution, can help verify the location and authenticity of claims, making the process easier for the employee and more robust for approvers.

SAP Concur solutions also integrate with major hotel chains, automatically pulling in itemised e-receipts that show the exact room charges, which helps prevent employees from claiming inflated per-night rates, adding fake incidentals or submitting handwritten or editable receipts.

Similarly, when you book a flight via Concur Travel or through partner airlines, all the details – dates, routes, costs, class of travel – are pulled directly into the expense system. That means that inaccuracies or manipulated entries get flagged and violations are more visible. If someone tries to claim the same flight twice – for example, once with a confirmation email and again with a fake PDF – it flags duplicate expense submissions.

And SAP Concur provides real-time reporting capabilities, so you can monitor expenses as they occur, helping to identify trends, outliers and unusual patterns in expense data.

SAP Concur: Your eagle-eyed management solution 

Our Expense, Travel and Invoice solutions, plus a range of additional products, provide a solid barrier between your business and misleading, inaccurate, or downright bizarre expense claims. The power comes from combining AI technology with human expertise, something SAP Concur has been doing successfully for over a decade  and continues to build upon.

Our solutions detect patterns and flag anomalies, such as someone consistently claiming just below receipt-required thresholds or always booking more expensive providers than their peers.

Our advanced fraud and compliance tools use AI and machine learning to efficiently review all expense reports, identifying those that require closer scrutiny. AI can detect anomalies and receipts with characteristics that seem out of place.

Intelligent Audit scans charges on expense reports, calling out exceptions and flagging those that require further verification. Certified human auditors then double-check these flagged charges before any reimbursement. 

Concur Detect solution by Oversight also uses intelligent trend and pattern analysis along with end-to-end expense audit processes. This allows for the review of expense reports against receipts before reimbursement, making it easier to identify anomalies and fraud.      

Taking the pressure off and letting AI do the hard work makes life better for your organisation and your employees.

Draw a line under expense fraud

Stopping employees from cheating the expense system and catching fraud before it's too late has never been easier. Although most cases are honest mistakes, as long as there are businesses there will always be fraud. Every step you can take now to pin down errant spend and fraudulent claims will count towards a stronger future.

From our core spend management platform, to specific apps that support receipt capture and mileage claims, all the way through to our robust auditing tools that have years of expertise combining AI and human capabilities, we are more than just an extra pair of eyes in your expense reporting process.

In a world where AI technology accelerates both the pace of product innovation and the detection of fraud, our solutions help protect your business from any challenges that arise and ensure you are ready for whatever the future brings.

Is expense fraud a concern for your business? Download our free eBook to discover actionable strategies and insights, including five key steps for improving risk management and how SAP Concur can help prevent and detect fraudulent activities.