Every corporation wants to believe its
organization is well run and all its employees have good intentions. The
majority of people do, but in every organization, there are a few who are
committing fraud, and people who get away with it will keep pushing the
boundaries. There also is, of course, a lot of unintentional waste simply from
human error. After payroll, expenses are the biggest cost for a business, but
because of time and cost, less than 20 percent of expenses go through proper
auditing.
Here are the most common
tactics among employees looking to defraud their companies on their expense
reports and how the burgeoning field of artificial intelligence is helping.
1)
Mislabeled Expenses
This trick is as
old as cashless transactions themselves. When we purchase pillowcases at
Walmart, we expect to see the retailer spelled out clearly on our bank
statements. Such transparency is less valuable in, say, the gentlemen’s club
industry. To monitor for charges that are not what they appear, today’s AI
systems can automatically cross-check each expense report receipt with data
from review sites like Yelp and TripAdvisor. For example, AppZen’s machine
learning program detected employee meals that were reimbursed at “K-Kel, Inc,”
which, it turns out, is the name that appears on receipts for the Spearmint
Rhino strip club in Las Vegas.
2)
Subtle Transfers of Wealth
Sometimes it’s fun to take the team for
coffee. We’ve all been there; it’s not a crime. Sometimes it’s also OK to spend
more than $20 at Starbucks—maybe grab a sandwich for the flight to go along
with the latte and the fruit plate. What’s not OK is expensing a hefty amount at
Starbucks when you’re actually refilling the retailer’s gift cards for personal
use.
This isn’t treating your team or treating your belly; it’s treating
yourself to low-level fraud. AI tools that use natural language processing,
computer vision and machine learning can analyze vast internal and external
data sets and sources in real time, identifying unusual behaviors and creating
risk scores to build a full understanding of each expense.
3)
Illicit Upgrades
Those who travel often for work learn
something pretty quickly: Business travel is a lot less glamorous than it
seemed when we were younger. The revelation can lead to frustration and even a
sense of entitlement that can manifest itself in upgrades that are at odds with
corporate policy like the time AppZen’s AI technology flagged an unusual
pattern occurring with the expense reports one traveler was submitting to an
AppZen client. The U.S. auto manufacturer employee was found to be upgrading
his rental car—against policy—to a Mercedes.
4)
Gateways to Larger Crimes
Occasionally, employees find themselves
involved in larger, fraudulent webs. Whether it’s via side hustle or
broader schemes at their day jobs, some employees eye prizes well beyond their
companies’ established parameters. On behalf of a major semiconductor company,
AppZen’s AI discovered that a client’s employee expensed a meal for someone who
worked for a company on the U.S. Office of Foreign Asset Control’s list of
entities with whom Americans are prohibited from doing business. AppZen also has
caught employees who treated their families to dinner multiple nights a week.
5)
Stuff Hidden Under “Miscellaneous”
The “misc” category is helpful; it can
be a major time suck to itemize all the tiny transactions of a common business
trip, and no one wants to hear all about that $2.25 spent at the parking meter
in front of the business lunch. Yet where there is great freedom, there’s
opportunity to exploit. AI has helped companies catch numerous sorts of willful
missteps loitering in the miscellaneous column—including extra luggage,
personal dry cleaning, home Internet access and TSA Precheck registrations.
AI
no longer means robots making cocktails for humans lounging by the pool. Rather
it is beginning to serve us in daily, practical endeavors like shoring up
occupational fraud and making the workplace more transparent. It is not about
replacing jobs but rather about empowering someone in any given role to focus
on the issues that really need his or her expertise. An endless pool of human
resources and time will never track to the level of detail that a powerful AI
engine can today. It is on the cusp of transforming how we work, not only with
expenses but across every part of the business.