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Purchase Card

Split Transactions Can Signal Potential Purchase Card Abuse

on January 26, 2018

Shuffling through the purchase card (P-Card) transactions in most organizations can reveal some strange things. We’ve seen some doozies come across spend data—multiple toupee purchases, bail bondsman charges, and synchronized ice-skating uniforms.

It seems P-Cards can be used for everything. While P-Cards can lower operational costs by automating supplier payments and streamlining the overall procurement process, they can also open the door to new risks like fraud and abuse. It takes an average of 18 months to detect occupational fraud. By that point, most of the funds are unrecoverable. Companies need to close this gap with the ability to quickly identify and resolve P-Card control failures before they cause damage.

To deter P-Card abuse, it is common to institute preventive controls such as dollar limits on daily and monthly transactions, dollar limits on single transactions, and restriction by merchant category codes (MCCs).

These controls reduce the possibility of misuse, but employees will still find methods to evade controls, such as split transactions. Split transactions involve breaking up a high-dollar purchase into smaller transactions to circumvent the internal controls limiting maximum dollar amounts for a single card swipe. For instance, a company may allow the purchase of computer equipment up to $1,000. But it could be possible to make a $3,000 purchase by splitting the purchase into three transactions, each for $1000. These are often made when a dishonest cardholder wants to avoid having to obtain approval for purchases in amounts above a set maximum. Other times, this pattern could indicate a need to adjust transaction limits to make legitimate purchases less of a hassle for cardholders.

Automated P-Card auditing solutions like Oversight Insights On Demand™ use artificial intelligence (AI) to identify split transactions on a single card or across multiple cards in a few ways:

  • Identifying multiple purchases made from the same vendor on the same date. These can be a strong indicator of split transactions.
  • Screening for round numbers. Most purchases have secondary charges, such as shipping costs, sales tax and other fees. It is unusual to see P-Card transactions in purchase amounts that are round numbers such as $300, $1,000, etc.
  • Detecting repeat offenders who frequently split purchases and allowing closer review of their P-Card transactions
  • Spotting merchants and MCCs with excessive split purchases, and flagging these transactions for further review.

Better visibility to split transactions helps companies detect and deter fraud and misuse. It also helps determine where spending limits should be adjusted. For instance, you may notice that IT staff are frequently splitting transactions for computer equipment, and a policy adjustment should be made to raise the maximum spend limit from $1,000 to $1,500 for these cardholders.

demo-oversightBy automatically analyzing 100 percent of your P-Card transactions with Oversight, you can prevent non-compliant spending and minimize risk. Demo Oversight to see how advanced data analytics can detect and resolve split transactions and other suspicious behavior in your P-Card program.

Sarah Zoloth is a Solutions Consultant with Oversight Systems.

Sarah Zoloth

Sarah is a contributor for the Oversight Blog.

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