Fraudulent expenses you might be reimbursing without knowing

In 2023, a woman in Atlanta was sentenced to 16 years in federal prison after Amazon uncovered an internal fraud scheme which diverted over $9 million. From 2020 to 2022, Kayricka Wortham, an operations manager for a warehouse in Georgia, submitted and approved fictitious invoices for fake vendors, for which the company reimbursed Wortham and six other employees.

This story is just one of many examples showing how expense fraud is still a risk for companies all over the world. In 2024 alone, the Association of Certified Fraud Examiners reported over 1,900 fraud cases, with expense reimbursements alone accounting for 13% of them.

Expense fraud affects workplace culture, damages team trust, reduces employee engagement, and undermines stakeholder confidence.

Expense reporting is critical for finance teams to maintain transparency, compliance, and accurate financial records. Yet, fraudsters are finding new ways to bypass company policies every day, and hidden within expense claims, fraud can quietly eat away at profits and damage trust.

Finance teams must be able to recognise which fraudulent expenses might go unnoticed, so they can implement preventive strategies and stop fraudsters before they strike.

Over $3 billion lost. That’s how businesses have lost due to expense fraud in 2024. And while fraud can take many forms, expense reimbursement schemes accounted for 13% of the reported cases, with a median loss of $50,000 per case.

While these incidents might seem isolated, they represent a growing problem for businesses all over the world, one that can have an irreversible impact on their financial and organisational health. Beyond direct financial losses, expense fraud affects workplace culture, damages team trust, reduces employee engagement, and undermines stakeholder confidence.

The numbers are alarming, and in a time where 10% of UK employees admit to submitting fraudulent claims “all the time”, finance teams need to be on high alert and adopt preventive strategies.

Mischaracterised expenses

This happens when a personal expense is submitted as a business one. It can be difficult to spot, as they often involve real receipts submitted with vague descriptions. A few examples include:

• Personal meals as business expenses: when an employee goes to dinner with friends or family and submits a claim as a “business meal”;
• Personal travel as a business trip: extending a business trip for a vacation and submitting the hotel or meals for the personal portion;
• Mileage for personal errands: request mileage reimbursements for a trip to a grocery store or a weekend road trip, claiming it was a work-related drive;
• Purchasing personal items with company expense cards: buying new electronics or groceries, and categorising them as office supplies or items for a client meeting. A good example of this happened at Amazon, when an employee submitted over $350,000 in fraudulent expenses for meals and drinks for a virtual event.

Inflated expenses

Exaggerating the cost of a legitimate business cost to get a higher reimbursement is a known tactic, and it can take different forms.

• Altering receipts: physically or digitally altering a receipt to increase the amount. For example, changing a $20 taxi fare to $50 or adding an extra zero to a meal total;
• Non-arms length/inflated vendor costs: when an employee pays a friend or relative for a business service at an inflated price and gets reimbursed, splitting the extra money;
• Rounding up: when employees “round up” the cost of a meal, taxi, or other expense. While it might seem minor, this adds up over time, especially if there are no expense limits in place;
• Overstating mileage: claiming a 100 km drive for a meeting when, in fact, it was only 20 km away, leading to higher mileage reimbursements.
• Submitting a higher-class receipt: booking a coach or second-class train ticket but submitting a receipt for first-class, and keeping the difference.

When hidden within expense claims, fraud can quietly eat away at profits and damage trust.

Non-existent expenses

This is the most blatant form of fraud, where an employee submits claims for expenses that never happened, using fake or fabricated receipts.

• Creating fake receipts: with the latest AI advancements, it’s easier than ever to create fake receipts for non-existent meals, taxis or other purchases;
• Fabricating business trips: when employees submit expense reports for a business trip that never took place, including fraudulent receipts for travel, accommodation and even meals;
• Using cancelled transactions: booking a flight or hotel, cancelling it for a credit or refund, but submitting the original receipt for reimbursement.
• Non-reimbursable items: including expenses for alcohol or leisure activities on a legitimate business receipt, and submitting the total for reimbursement.

Duplicate expenses

When the same expense has been submitted multiple times to be reimbursed more than once. Detecting duplicate receipts in expense reports can be challenging, especially for businesses that rely on manual reporting systems

• Submitting the same receipt twice: when an employee submits a receipt for a hotel stay on two different expense reports, months apart, hoping it will be missed;
• Submitting a physical receipt and a digital copy: submitting a paper receipt and a digital copy at different times;
• Splitting expenses with a colleague: when two or more employees submit the full receipt for a team lunch or dinner, claiming it as their own expense.

Fraudulent expenses can take many forms, and recognising them is only half the battle. The next step is learning how to spot them before they cause real damage.

What often begins as small irregularities can rapidly become a real problem for finance teams. Hence the need for early detection of expense fraud. Warning signs include:

• Frequent expense claims just below policy approval limits;
• Repeated submissions involving the same vendors without a clear justification;
• Claims with vague, incomplete, or missing details;
• Increased frequency of manual corrections or late expense submissions.

Finance teams must be on high alert and catch all the signs. Look beyond basic totals and submission dates and focus on understanding behavioural patterns. These subtle indications are easy to overlook, but they signal deeper problems that can help protect your business from further damage.

Fraudulent claims can easily bypass the expense management process, especially when said process is reactive instead of proactive.

Take the case of Scotland’s water industry regulator who submitted multiple expense claims between 2018 and 2023 with no clear business purpose. The expenses included business class flights, a Harvard Business School course, a designer wallet, and more, which far exceeded the policy limits.

Policy enforcement, regular employee training, and clear communication help foster a culture of accountability, which is crucial to avoiding fraud. But so is technology.

Finance teams must look beyond basic totals and submission dates and focus on understanding behavioural patterns.

Finance teams should no longer rely on outdated and manual expense management processes. Smart solutions like Rydoo Smart Audit allow businesses to use advanced AI to proactively detect duplicates, non-compliant expenses and manipulated claims in real-time, so they can stop fraud before it slips through the cracks. Rather than relying on manual spot checks, finance teams can monitor 100% of claims with zero added workload.

The system also helps identify suspicious patterns, so they can quickly take action and adjust their strategies to avoid further issues. Over time, manual interventions are cut down to the strictly necessary, saving finance teams time while maintaining fraud at bay.

Expense fraud is a constant threat to organisations, one that can easily go unnoticed and cause irreversible damage to a business, but a proactive approach can mitigate the risk.

Finance teams should know what to be on the lookout for and take a proactive stance to avoid fraudulent expenses. Introducing robust policies that are clearly communicated is a must, but so is implementing the right technology that adds an extra layer of protection against fraudsters.

Fraud may start small, but so does control. And with the right systems in place, finance teams can catch the problem before it spreads.