‘Tis the season for gifts and joy: and gifts can come in many forms. In an effort to spread cheer and goodwill, or simply to take advantage of holiday deals, some people step over the line and “bend the rules”. Historically, there is a noticeable uptick in fraud cases during the month of December. This coincides predictably with the general increase in consumer spending. Here are some ways to prevent “Jack Fraud” from paying your organization a visit this holiday season.
Introducing “Jack Fraud”
As our spin on the devious winter spirit Jack Frost, “Jack Fraud” is a personification of holiday season card fraud. He takes advantage of the mirth and season of giving by striking while the iron is hot… or cold, in this instance. Due to the gift-giving nature of the season, there is an increase in corporate or purchasing card fraud in the month of December.
Oftentimes, the trail goes cold when trying to track down Jack Fraud. He is a crafty one, after all. It takes 12 months on average for organizations to detect occupational fraud, if it goes detected at all. But at Card Integrity, we’re wise to Jack’s mischievous schemes, and we have plenty of forensic experience. We’ve caught Jack red-handed on many occasions.
Jack has many methods to ruin the holiday season. In this blog post, we’ll discuss five of the most common.
Fraud Case 1 – Rubber Stamping/Poor Oversight
Rubber stamping describes the process of approving purchases without sufficient review or approval processes in place. There are many potential factors that can cause rubber stamping to occur, ranging from short-staffing and limited time or resources, all the way to general complacency or trust built up between employees. Regardless of the reason, rubber stamping leaves your organization’s spend vulnerable as the process undermines the credibility of various expense review processes. Without proper attention to detail, non-compliant purchases can start to slip through and lead to wasteful spending.
Fraud Case 2 – Fabricated Vendors
Fabricated vendors refer to business entities that are either partially or entirely made up and used to document a purchase with the intent of misleading those tasked with reviewing expenses. By fabricating a business and listing it in purchasing documentation, the purchaser may be making a concerted effort to circumvent their organization’s internal controls. A made-up business entity can be pretty difficult to catch. If your expense reviews rely too heavily on manual processes or do not include enough details, it can be possible for tactics such as fabricated vendors to sufficiently cover up fraudulent purchases.
Fraud Case 3 – Receipts
Receipts are another piece of documentation around purchases that can provide opportunities for covering up fraudulent purchases. Some examples of tactics that purchasers may use to cover up non-compliant purchases on receipts can include:
- Physically covering up details
- Improper receipt submission (i.e. picture of a gas pump, documenting the total cost of a purchase without transaction details, “oops, I forgot my receipt.”, etc…)
- Fabricating parts of or a whole receipt
Fraud Case 4 – Double Dipping
Double dipping (no, not the party foul) occurs when a purchase is documented more than once. This can be done either knowingly or unknowingly, and can involve various purchasing systems. For example, a purchase made with an organization’s funds may be documented by the purchaser as an out-of-pocket purchase. If out-of-pocket purchases are typically reimbursed, then the purchase that was reported as an out-of-pocket purchase, plus the cost to reimburse the purchaser, will add up to cost the organization double, while the purchaser gets paid a reimbursement for a purchase they never made.
Double dipping, and other types of duplicate payments (some of which are honest mistakes, unlike double dipping) can be discovered with better visibility into not just purchasing card transactions – but AP invoices too. And to find duplicates across cards and invoices, you must have a centralized way to see both and compare them against each other. Check out our Invoice Review white paper for more information!
Fraud Case 5 – Gift Cards
Gift cards, we all know them. There are many reasons why gift cards are often a tempting purchase. Maybe an employee is retiring, and a gift card seems like an appropriate gift to show appreciation for a great career. Or, maybe there’s a special occasion or party at work, and a gift card seems like it would make for a great prize for someone to wrap up a fun day’s activities. However you look at it, while gift cards may seem like an innocent purchase if the reason is right, they are also a very easy place to look to find fraud. Due to their nature of being essentially a supplemental form of cash, gift cards offer essentially zero visibility into what is being purchased with them, making them a frequently visited option for mischievous purchasers looking to hide a fraudulent transaction.
We published a recent article about getting ahead of gift card schemes – check it out for more info.
‘Tis the season to take a closer look at receipts
Jack Fraud targets organizations that aren’t quite there yet to do true 100% review of all transactions. But Card Integrity is here to help. For example, we offer a receipt validation service. It shifts resources away from menial, repetitive work to free employees up to do more engaging, rewarding work than going through receipt submissions, and it introduces a strong internal control to fight against receipt fraud, gift card schemes, and other known Jack Fraud tactics.
With stronger internal controls, you can rest easy this holiday season. Roast some chestnuts on an open fire… and tell Jack Fraud to go nip on someone else’s nose.
