Strategies to Prevent Commercial Card Fraud

In a recent case, an employee of the Georgia Bureau of Investigation defrauded the government office for more than $60,000 in expenses by charging personal purchases on a state-provided P-Card. Such events should caution procurement managers toward the inherent flaws existing in commercial card usage.

Employee fraud in the use of procurement cards (P-Cards) and travel and entertainment expenses (T&E) is highly common. The high volume of commercial card transactions makes it easier for employees to evade the controls in place, which also become lackadaisical in nature with the passage of time.

Split transaction is one such method of commercial card fraud that involves breaking up of high-dollar spend into smaller transactions to dodge the maximum dollar amount limit on the card. This kind of fraud is somewhat hard to detect, as the payment tends to be below the maximum single transaction limit.

Common characteristics to identify split transactions is to look for multiple purchases made to a single vendor on the same date, and checking for rounding up of the transaction cost, as it is unusual for commercial card transactions to have a rounded amount.

Fraud Mitigation Strategies

Implementation of pattern-driven data analysis of the transactions can help to capture anomalies related to high spend in specific categories and deducting transactions that are unauthorized. These patterns can point toward repetitive offenders who have neglected the standard operating procedures while performing commercial card transactions.

Setting spend limits on a monthly, department or individual level can restrict the maverick spending and bring in control in the commercial card system.

Deploying automated procurement software can greatly reduce the fraud risk when it comes to commercial cards. The application of technology takes the power away from a group of individuals and makes tracking of payments easier, reducing unethical card usage.

Adopting a virtual card is also a favorable solution. A virtual card is a 16-digit card number that is generated for a specific transaction and is valid for one transaction and stays active for a limited time. This technology significantly aids in curbing deceitful employee transactions in the commercial card space.

The benefits attributable to commercial cards drive their adoption; however, the risk of fraudulent transactions and illicit usage of the card makes procurement managers skeptical about the expanding commercial card usage. However, the benefits of commercial card adoption greatly outweigh their non-implementation. This makes it essential to use fraud-combating controls and strategies.

Conclusion

Commercial card usage has not been able to reach its optimal utilization to save cost and improve spend control. Add to this the recurrent scenarios of fraud that further inhibit their acceptance. Nevertheless, deploying technology that focuses on data analytics and regularly modifying the rules regarding commercial card usage can constrain the occurrence of deceptive transactions.