Instead of running false invoices through accounts payable, some employees make personal purchases on company credit cards or on running accounts with vendors. (See the “Purchases on Credit Card or Company Account” flowchart that follows.) Unlike invoicing schemes, prior approval for these purchases is not required. An employee with a company credit card can buy an item merely by signing his name (or forging someone else’s) at the time of purchase. Later review of the credit card statement, however, might detect the fraudulent purchase. Unfortunately, many high-level employees approve their own credit card expenses, making it very easy to carry out a purchasing scheme.

Of course, only certain employees are authorised to use company credit cards. Employees without this privilege can only make fraudulent purchases with a company card if they first manage to get hold of one. To this end, company cards are sometimes stolen or “borrowed” from authorised users.

EXAMPLE

An accountant falsely added her name to a list of employees to whom cards were to be issued. She used her card to make fraudulent purchases, but forged the signatures of authorised cardholders to cover her tracks. Since no one knew she even had a company card, she would not be a prime suspect in the fraud even if someone questioned the purchases. This employee continued her scheme for over five years, racking up a six figure bill on her employer’s account. In addition, she had control of the credit card statement and was able to code her purchases to various expense accounts, thereby further delaying detection of her crime.

Another way to conceal a credit card purchasing scheme is to doctor the credit card statement so that fraudulent purchases do not show up. Some employees go so far as to destroy the real credit card statement and produce counterfeit copies on which their fraudulent purchases are omitted.

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RETURNING MERCHANDISE FOR CASH

The fraudulent purchase schemes discussed to this point have all involved false purchases of merchandise for the sake of obtaining the merchandise. In some cases, however, an employee buys items and then returns them for cash.

EXAMPLE

An employee made fraudulent gains from a business travel account. The employee’s scheme began by purchasing tickets for herself and her family through her company’s travel budget. Poor separation of duties allowed the fraudster to order the tickets, receive them, prepare claims for payments, and distribute cheques. The only review of her activities was made by a busy and rather uninterested supervisor who approved the employee’s claims without requiring support documentation. Eventually, the employee’s scheme evolved. She began to purchase airline tickets and return them for their cash value. An employee of the travel agency assisted in the scheme by encoding the tickets as though the fraudster had paid for them herself. That caused the airlines to pay refunds directly to the fraudster rather than to her employer. In the course of two years, this employee embezzled over $100,000 through her purchase scheme.

 

credit card purchase

Billing Schemes: Personal Purchases on Company Credit Cards

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