Jul 20

What to do when you suspect corporate credit card fraud

A recent KPMG report found that fraud cases cost Australian industry more than $300 million in 2015. Alarmingly, the commercial and government sectors suffered frauds in excess of $30 million and $100 million respectively. There are a range of fraud types (theft, misappropriation, forged documents), however, in my experience, the most common is the misuse of the corporate credit card.

Fraud is often perpetuated over time in an environment with ineffective or non-existent monitoring or controls. Having investigated numerous frauds, I have found in some cases, that glossy posters and annual PowerPoint presentations were seen as adequate fraud control measures. While annual ‘appropriate behaviours’ and policy awareness training is part of the solution, knowledge of what to do if you suspect fraud is also required.

 

Misuse of the corporate credit card

Organisations provide corporate credit credits to employees for a range of reasons, however, typically they exist to allow for flexibility when undertaking work related travel, purchasing goods and services and, in some cases, entertaining clients. Unfortunately, the possession of a corporate credit card can prove, for some, all too tempting to misuse, particularly if the threat of detection is considered by employees to be low.

While the list is not exhaustive, the following are some of the ways employees misuse corporate credit cards:

 

  • Deliberately over quoting travel expenses in order to withdraw more money than entitled to;

 

  • Paying school fees and purchasing school uniforms;

 

  • Paying for fuel, car servicing or purchasing a family car;

 

  • Purchasing personal clothing and gifts;

 

  • Paying off a personal credit card or mortgage; and

 

  • Unauthorised withdrawal of money in order to gamble, purchase drugs or pay for prostitution services.

 

 

What to do when you suspect an employee of misusing their corporate credit card

 

1. Cancel the credit card

 

If evidence of regular unauthorised misuse becomes apparent (usually discovered on the bank statement) cancel or suspend access to the card and account immediately. This prevents the continued loss to the organisation, but also puts the employee on notice that the misuse has been detected.

 

2. Secure, retain and obtain!

 

In order to assist any further action by the organisation, such as an investigation, ensure any documentation relating to the use of the credit card is retained or obtained. For example:

  • Gather the current and previous credit card statements. In some cases employees will ‘test the water’ and make a small unauthorised purchase to see if it is detected. This occurs in larger organisations where the employee assumes credit card statement surveillance is minimal.

 

  • Gather and retain any documentation that relates to authorised credit card use in the past. This demonstrates the employees understanding of acceptable use, and can be used to challenge any contention by the employee that they were not aware of what constituted authorised and appropriate use of the credit card.

 

  • Request the employee provide receipts for the purchases which are considered to be fraudulent.

 

  • Obtain from your credit card provider or bank a detailed ‘back-end’ card transaction report for the account. In some instances the credit card provider, depending on their internal privacy processes and fraud control policies, may release to you information about whether a PIN was used during the transaction, and where and when the transaction took place. This may assist you to challenge any assertion by the employee that they had lost their card, had it stolen or it was skimmed.

 

3. Consider your options: Investigation or report to the police

 

Depending on the size of the misuse, a decision may need to be made about whether the alleged misconduct is reported to the police, or handled internally by way of workplace investigation. There are a lot of factors to consider when reporting such a matter to the police, and I would encourage you to discuss your options with them.

If you choose to handle the matter internally, ensure that your organisation’s workplace investigation policy is sufficient to deal with such matters, and the proposed internal investigator is prepared and experienced to investigate this type of misconduct. If this is not the case, use an external investigator who has a fraud investigation background. It is also worth considering using an external investigator if the person being investigated is very senior in the organisation.

Additionally, to ensure the best outcome, for all involved, ensure that procedural fairness and an open mind is maintained.

 

4. Provide support for your employee

 

In my experience, there are a number of reasons why employees commit fraud. For example, it might be they are suffering financial difficulties (sometimes indicated on the statement by a withdrawal, quickly followed by a deposit two or three days later). It could also be that they have, or are developing, a gambling or substance abuse issue, or they are a victim of domestic abuse. And of course sometimes it is just because they choose to engage in such behaviour. Irrespective of the situation, the organisation should still seek to offer all options of support to the employee while the matter is being investigated or managed.

 

5. Review internal processes

 

Finally, once the incident has been investigated or managed, take the time to reflect upon your organisation’s internal processes and controls. Ask yourself:

 

  • Are internal fraud controls, management and administrative processes robust enough to prevent or minimise fraud?

 

  • What can be done to strengthen them and prevent repeated incidents?

 

  • Who actually needs a corporate card?

 

  • Are there better ways of providing payment flexibility without exposing the organisation to credit card misuse?

 

About Jason Clark

 

Jason ClarkJason Clark is an Associate Director at Worklogic and is based in Sydney.  Jason has extensive experience as a workplace investigator, investigating a range of issues including fraud, bullying, harassment and sexual misconduct. He has also assisted numerous organisations develop strategies to minimise poor behaviour and encourage a positive workplace culture.

Prior to joining Worklogic, Jason was the Joint Investigation Office Commander for the Australian Defence Force Investigative Service. Acting as mentor and leader, Jason managed a team of investigators in a dynamic environment, handling complex cases.  For more advice, please email Jason or call him on (02) 91528706.

 Subscribe to the Worklogic blog to receive expert advice on resolving workplace complaints and building a positive culture at work direct to your inbox each week!