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9 Measures that Can Help Reduce Risk of Internal Credit Card Fraud

June 25, 2019

Every organization needs credit cards. They are essential in places where checks are not accepted. Moreover, they negate the need for cash advances and reduce the amount of paperwork and transaction costs. However, just like cash, credit cards are at risk of theft as well. While for most businesses, unauthorized use of credit cards by outsiders is the primary concern, fraud or abuse by individuals inside the organization also poses a very real threat.

The most common ways in which internal credit card fraud takes place are as follows:

  • The credit card is used by employees for unauthorized personal expenditures, such as gasoline for personal vehicles, groceries, and so on.
  • Double dipping - i.e., using the credit card to purchase something, and then submitting documentation to claim reimbursement for the same. For example, an employee who pays for a meal expenditure related to a business trip using the company’s credit card and then also submits the receipt for the same transaction for reimbursement on his expense report.

There are measures businesses can take to protect the company from internal credit card fraud. These include:

  1. Keep the number of credit cards, credit card issuers, and authorized credit card users to a minimum. Make sure each employee is responsible for his own card. These should not be given to others for use. Cards should be canceled when an authorized user leaves the organization.
  2. Review the authorized user’s needs, and accordingly set credit limits to minimize exposure. Do away with cash advance facilities.
  3. Opt for credit card company alerts, and in case of suspicious or unusual transaction notifications, conduct investigations immediately.
  4. Maintain a secure list of credit cards by issuers, account numbers, authorized users, and issuer phone numbers, so that loss, theft or unauthorized use can be reported quickly.
  5. Put in place organization policies that establish that authorized users are solely responsible for the activity on their cards, as well as for reviewing the statement for activity in each period.
  6. Conduct your own review of statements, and make sure they are not altered, revised or edited in any way. Credit card activity should be analyzed for the type of expenditure, vendor, and reasonableness of amount.
  7. Request a card statement cut-off date for all cards. This makes it easier for you to obtain and review credit card activity, and also facilitates accounting.
  8. For documentation purposes, insist on receiving all of the following – credit card receipt, invoice, and credit card statement.
  9. While reviewing reimbursement claims, compare the statement to the expense report activity and be wary of claims made months after the original charge was made.

By monitoring credit card activity carefully, you can minimize the chances of internal credit card fraud.

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Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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