Expenses fraud can take many forms. Employees may inflate the cost of legitimate business expenses or misrepresent personal costs as business costs. They might claim for the same expense multiple times, also known as “double dipping”, or even start submitting expense claims through fake employee aliases.

It starts small

According to Benson Varghese, a US board-certified criminal lawyer and a criminal defense attorney, expenses fraud has seen a lot of evolution in the past few years. Varghese says: “In the cases I have dealt with, it is not the technology that is shocking. It is the normalisation of small dishonesty that escalates incrementally.” 

As Varghese explains, this kind of fraud often starts small. Minor exaggerations become inflated and, over a longer period of time, a routine emerges. Those small discrepancies can add up to serious and sustained misconduct. 

Expenses fraud goes far beyond financial loss. It speaks to a wider culture of dishonesty, dissatisfaction and disengagement within the company ranks. It could also lead to considerable reputational damage. And it’s often small businesses that are particularly vulnerable. Without the necessary checks and balances in place, expenses fraud can go unnoticed for long periods of time, and employees may take advantage of any company blind spots.

It’s now easier to commit expenses fraud

In the past, committing fraud required a certain level of technological skill. Today, those tools are readily accessible and often free. And in the era of AI, anyone with basic internet literacy can create a falsified receipt or deepfake in a matter of seconds. In short, you don’t have to be a criminal mastermind to rig the system. And it’s often difficult to prove. 

Often, expenses may be accrued from travel or client dinners. If fake receipts and documents are created, they can be so convincing, it’s nearly impossible to distinguish them from the originals. 

Alex Kugell, Chief Technology Officer at Trio, explains: “Today’s fraudsters are getting quite crafty. They use generative AI to generate or edit receipts since it can render paper texture, lighting and even the tiny smudges we usually don’t notice.”

So, as this technology becomes even more powerful, how can we hope to spot it? 

Round numbers, dubious paper trails

Rounded amounts and lack of a real paper trail to back up each claim are all strong indicators of potential misconduct. 

According to Varghese, the answers lie in behavioural patterns. “Employees make smaller, more frequent claims rather than a single large claim,” he says. “The problem isn’t with the receipt. It’s with the trend.”

Those red flags appear in small shifts, such as when “reimbursement patterns suddenly change to more frequent claims, to claims in round numbers, to last-minute claims just before reporting deadlines, or to approvals that circumvent regular review procedures,” Varghese explains.

Look at behaviour

While the advent of sophisticated technology may seem like the biggest hurdle facing accountants and businesses, human judgement remains critical. All too often, companies rely on a paper trail for evidence and forget the person behind it.

“But the most telling sign of trouble is a lack of transparency,” Varghese says. “When a person becomes evasive about the simplest verification, that’s when companies need to take notice.”

Culture and policy trump technology

The good news is that technology is improving on both sides. Just as there are AI tools that enable fraudsters, there are also tools and software that can detect and flag discrepancies. They can flag unusual patterns, cross check against locations and timestamps and remove human bias or error.

But technology is just one part of the solution. For business owners, having a clear expense policy is also key. Define your limits and make the approval process consistent. Checks and balances help keep things fair, so rotate approval, conduct regular audits and ensure that everyone is held accountable – even those at the top. Even simply issuing company cards can track spending and streamline the process. 

Combating expenses fraud also involves fostering a culture of accountability and honesty. Employees who feel respected and fairly treated are far less likely to take advantage of their workplace systems. As Varghese explains: “Prevention is more than just software; it’s culture and structure.” 

As these digital tools continue to evolve, staying one step ahead will require systems that both detect and prevent misconduct, and a company culture founded on integrity.