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The Value of Identifying the Repeat Offender

on March 22, 2021

Here’s an interesting fact from the Oversight T&E vault:

Analyzing aggregate client data, we’ve determined that only 5% of travelers in an organization make more than 80% of the purchases flagged as fraudulent.

It’s a stat that first appeared in our Spend Analysis Report, Volume 1, Fall 2014. But it remains a finding we encounter repeatedly: a few bad actors are often responsible for the vast majority of the fraud, misuse and waste in an organization.

The recidivism landscape in corporate spend is high because the barriers to stopping repeat offense and the safeguards in place to protect the organization are limited to expense report approval and audit.

 

Organizations often come to other, more frightening realizations of fraudulent activity after months or years have passed. T&E fraud can be the canary in the coal mine, allowing fraudsters to test controls and deploy more egregious schemes.

 

A study conducted by the ACFE found that in 75.6% of cases involving expense reimbursement fraud, the perpetrator was also engaged in at least one additional form of occupational fraud. Recidivism at work: when left unchecked, repeat offenders re-offend.

Embedded in these troubling truths are a few clear implications for business. Suppose most of the fraud, misuse and waste inherent to your organizational spend is perpetrated by a small handful of employees. In that case, it stands to reason that these employees should be identified, monitored and retrained in the ways of corporate spend policy.

Also evident is the value of continuous monitoring. For many organizations, the pattern of fraud, misuse and waste goes unchecked at the point of attack. It’s only later, at the end of the quarter or the year, when audits are done and overarching trends towards out of policy spend are uncovered that any action is taking.

But imagine, for a moment, what it looks like for an Oversight client, with continuous monitoring of 100% of spend and AI-powered analysis of spend data trends across metrics in the measurement of individuals, departments and time.

It’s far easier for these organizations to understand the implications of spend data any way you can slice it. It’s flatly impossible, for example, to pass off a $500-per-night Airbnb stay in a $200-per-night Airbnb region. Equally impossible is an employee’s ability to submit a dinner receipt from an adult venue address. Or to miscategorize luxury goods (say, a Rolex watch) as business supplies. And impossible too, to boil the frog slowly, by increasing milage charges incrementally each month in perpetuity.

With such clarity around the many layers of spend data, the old tricks stop working. The employees get the memo that spend monitoring is decidedly in place, and then a clear picture of three groups of out-of-policy spenders emerges.

In the wake of the COVID-19 crisis in March 2020, Oversight’s recent Spend Insights Report reveals the impact of a tremendous number of new spenders hit the organizational books as vast swaths of the workforce popped up home offices at once. In a challenge for finance and a speed bump for established risk profiles, many made purchases with personal cards (or via PayPal) and submitted what for many was a first-ever expense report.

In short, the pandemic led to a massive influx of low-visibility, high-risk spend. For those organizations relying on semi-annual retrospective audits alone, uncovering a significant amount of fraud, misuse and waste in 2020 may remain on the 2021 audit horizon.

But for those organizations already monitoring 100% of organizational spend risk, the challenges were so much more meetable. It was far easier to focus on trends, departments and cost levels, and shore up policy gaps based on timely information. Spend analysis capabilities became, in short, a must-have tool to pivot into a national remote workforce overnight.

So, what is the value in catching misuse and waste early? While every company is different, for many organizations, the answer runs in the millions. Most organizations in our sphere can affect organization-wide behavioral changes to bring T&E waste in line with the global employee population exception rate within 3-6 months.

Want to see how? Connect with us today, and we’ll show you exactly how we track and eliminate risks posed by repeat offenders.

Nathanael L’Heureux

Nathanael L'Heureux is Vice President of Solution Consulting at Oversight Systems. He holds a Bachelor of Science degree in electrical engineering and computer science from the University of California, Berkeley.

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