How to Protect Your Company from Credit Card Fraud

“I just can’t believe Sandra* would do that!”

“Are you sure it was her?”

“She just doesn’t seem like the type of person that would steal from the company.”

And on and on it went. But Sandra did steal from Dynasty Enterprises, in one of the most common (and easiest) ways—through the company-issued credit card.

Sandra was a short on cash and figured the company wouldn’t miss it. Dynasty issued credit cards to all employees, but the individual employee is responsible for managing the card. While employees paid their company credit card bills directly to the card provider, Dynasty also reimbursed employees for company-related travel and purchases. Through the reimbursement process, employees did not have to use personal funds for company business. But Sandra also realized this was a system she could still exploit.

Sandra thought about Daisy Office Supply, one of Dynasty’s preferred suppliers. In her position, Sandra worked with Daisy all the time and often approved their invoices. It wouldn’t seem odd for Sandra to sign-off on a large invoice amount, such as a group of Daisy invoices totaling $2,500.

“I’ve processed bigger payments in the past,” Sandra thought. “I can tell the accounting department that Daisy insisted on immediate payment so I paid for the invoices through my company card. I now need to be reimbursed for those invoices immediately so that I can pay my company credit card bill. But, instead of paying my credit card, I’ll have extra money for me.”

With her explanation ready, Sandra created fake Daisy invoices similar to real ones (all she needed was word processing software and a fax machine) and submitted them for reimbursement. She knew that Jane in the employee services department processed reimbursements and Johnny in accounting handled the company credit card program. “Jane and Johnny aren’t in the same department,” Sandra said to herself as she turned in her fake invoices for reimbursement, “and the credit card statements won’t arrive in the office for another two weeks. No one ever will catch me.”

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How did this happen?

Sandra was a desperate employee who saw an opportunity she thought she could exploit.

How was she caught?

Dynasty is a company that believes in checks-and-balances. What Sandra didn’t know is that Jane and Johnny meet each month when the credit card statements arrive. They perform a reconciliation, where reimbursements are compared to credit card statements. Together, Jane and Johnny verify transactions and ensure there are no missing reimbursements. Usually, this reconciliation process only takes 30 minutes. But this month it took longer, because they found a $2,500 discrepancy—and Sandra’s fraud. By reviewing each transaction on Sandra’s statement from Jane, and comparing the credit transactions to Sandra’s reimbursements from Johnny, they caught her. Jane reported her findings to the CFO and things moved fast from there.

When the company CFO confronted Sandra, she admitted to the fraudulent invoices. She was immediately fired and was criminal charges were filed by the company. Ultimately she was forced to repay the money and now has a criminal record, all for $2,500.

Sandra’s story is a common one and one that most companies will not admit to. Sandra thought she would get away with her fraud, but Dynasty’s good business processes caught her actions.

Your business should follow Dynasty’s model and do all you can to prevent credit card fraud. Here’s how:

Create a “trust but verify” environment

The overwhelming majority of your employees are honest. However, you owe it to your company to protect your resources. A big enough fraud can literally mean the liquidation of your business. Good business practices are not about mistrust—they are about protecting your business resources and your employees. Fraud often occurs when people see an opportunity to exploit. Create an environment where fraud appears challenging.

Have a card program manager

Your company card program should have at least one overall manager with the authority to work with and direct all departments and managers as needed. Jane at Dynasty had the authority to cross department lines to work with Johnny and then take her findings to the CFO. Fraud doesn’t care about departmental silos.

Perform reconciliations

Just like a bank reconciliation can identify banking errors, credit card reconciliations can help identify fraud. The reconciliation between Johnny and Jane was a major step in catching Sandra. Your company needs to ensure that credit card transactions are compared to all supporting information.

Limit or prohibit personal transactions

The company credit card should be only for company business. Prohibit employees from using the company credit card for anything personal. The more transactions on a card, the greater the opportunity for fraud.