Business credit card fraud is normally an inside job. In fact sometimes its referred to as, “Internal Credit Card Fraud.” This manner of fraud utilizes a company issued credit card.
Credit cards are a fact of life in the world of business today. They can streamline purchases and reduce the need to have cash on hand or cash advances. They are often readily accepted where company or personal checks are not. They are just about as liquid as cash and thus are subject to a significant risk.
When an employee is given a business credit card they have access to the credit card issuer, the credit card number, the card’s expiration date, the card’s credit limit, the card’s CVC2/CVV2 code, and in some cases whether or not their usage activity is even being monitored by the employing company.
A few of the common types of business credit card fraud are: Personal Charges, and Double Dipping.
Personal Charges involves the employee using the company issued credit card to buy things like groceries, gasoline, or other personal items.
Double Dipping is when an employee uses a business credit card to make a purchase and then submits the receipt for the same purchase for reimbursement by the company on an “expense account.”
Internal controls should be in place within the company to regularly audit transactions made by employees who have been issued a business credit card. First and foremost, prior to issuing any card, the employee should undergo a background investigation that includes a review of their consumer credit report. Secondly, as the process of who receives the monthly invoice from the credit card company and who pays the bill monthly should be segregated. There should also be a strict written policy on the use of business credit cards that is signed and acknowledged by the employee prior to the card being issued to them. This policy should indicate that all personal purchases made with the card are to be paid by the employee promptly. An audit of the purchases made on the company card should be monthly to determine the reasonableness of the purchases. Also, establish a limit on the card that the employee cannot exceed. Furthermore, set the tone for adherence to all policies involving the issuance and usage of business credit cards at the top!
Here are 5 signs of business credit card fraud:
1. Personal items are being purchased (i.e., concert tickets, new washer and driers)
2. Items being purchased on weekends or holidays (i.e., purchases made on the 4th of July in the United States)
3. Items that are purchased via the company credit card also appear to be submitted for “expense account” reimbursement (i.e., there is a charge for a carwash of the company car on the credit card’s monthly invoice, and a receipt for a carwash being submitted for expense reimbursement.)
4. Large payments are being made to outside vendors using the company issued business credit card without proper proof of documentation or evidence of a bidding process.
5. The monthly balance on the card is higher than is commensurate to the employees job function.
Remember too, all indicators of fraud most be reviewed circumstantially for their totality.
